Friday, August 2, 2013

Gas prices begin August by bouncing off the post-spike bottom


I concluded Prediction confirmed on gas prices with good news, then a not so rosy prediction.
Sure enough, when I walked past the corner station, it was selling regular for $3.49, almost a dime below the Detroit average.  Not only did I call the price, the fear premium spike is definitely over.

I would post Professor Farnsworth, but because this price is below the expected national average of $3.52 for the current Brent price of $107.17, I expect that we're near a bottom, just like we were at the beginning of the month.  The local price is not likely to go much lower, and that's not good news.
I was sure enough of my prediction that I filled up my car's tank at $3.49 that Sunday evening.  I felt a little foolish on Monday morning, as the corner station dropped its price to $3.45.  That ended up being the post-spike low.  Tuesday, the corner station's price jumped 24 cents to $3.79.  Wow.  I knew prices wouldn't get much lower (they didn't) and would likely go up soon (they did) but I didn't expect anything that drastic.  It turned out that all I had to do was wait.

The rest of the week followed the usual scenario.  The three stations down the street held firm at $3.49 on Tuesday.  Wednesday, they raised their prices to $3.59.  The corner station dropped to $3.69.  What usually happens next is that the corner station matches the other three.  Sure enough, the corner station joined the rest at $3.59.  That's where all of them stand today.

So, I ended up being right.  The prices dropped only slightly and then rose.

As for what's next, Econobrowser lists the national average at $3.64, the Michigan average at $3.68, and the Detroit average at $3.61.  In addition, the expected national average given the current price for Brent crude of $108.95 should be $3.56.  Therefore, the local prices are reasonable.  What will determine the direction is the price of crude, which shot up earlier in the week but is now dropping.  If it stays up, so does gas.  If it continues to drop, gas should follow.  It's as simple as that.

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