It's been twelve days since I posted The corner station retreats again, but only two cents worth.
The corner station stayed in its trench on Tuesday, so there was no charge into No Man's Land this week. Instead, the three stations down the street dropped their prices slightly to $3.54, where they've remained since. The corner station dropped a penny Wednesday to $3.55, then matched the rest of the outlets in the neighborhood Thursday at $3.54. I predicted local prices would end the week between $3.49 and $3.59, and all four of them ended up exactly in the middle of the range. Perfect.Note that I used a lot of words to basically say what I said the week before, that prices would stay between $3.49 and $3.59 for the next week. Other than a charge into No Man's Land by the corner station, that's exactly what happened. Last week, the corner station jacked its price for regular up to $3.85, which meant that mid-grade was selling for $4.00. Oh, no, four dollar gasoline! That only lasted a day, as the three stations down the block held firm at $3.54. The next day, the corner station rejoined them. Neighborhood gas prices were still below where they were this week last year, when they fluctuated between $3.59 and $3.69. Yesterday, the corner station displayed more caution, raising its price to $3.79, while the corner station still held firm at $3.54. Today, all stations moved. The corner station dropped its price to $3.69, while the three stations down the block raised theirs to $3.60. I expect the corner station to continue its swift but orderly retreat over the next two days and join the rest of the neighborhood outlets at $3.60.
As for what's next, Gas Buddy shows that metro Detroit prices hit a low for March of $3.59 last Friday, then shot up over the weekend to $3.65 before resuming their steep glide down to Thursday's $3.61. I wouldn't be surprised if they continued to drop. I would expect $3.52, but the low end of the range at $3.49 is still possible if Detroit area prices continue to drop. However, there is upward price pressure from the national average, which ceased its brief decline on the 21st at $3.51 and has resumed its slow and steady rise to $3.52. If that trend continues, then it will set a floor on local prices and possibly push them up to the top of the range I set last week, which is $3.59. Unless something drastic happens in the next seven days, I don't expect prices to go any higher.
As for the larger picture, Gas Buddy shows that the corner station was just reflecting the rise in national and local prices. The national average jumped from a short-lived plateau of $3.55 a couple of days ago to $3.58 today. Detroit's average jumped higher, from $3.64 three days ago to $3.73 yesterday. Today, the metro area's prices held steady. Based on the usual seasonal pattern, which has held very well over the past two months, it should decline slightly before going up again--and up it will go, as both the overall seasonal increase in gas prices will continue until July and the price of oil is going up, too. Reuters reported today U.S. crude oil up on spike in gas demand, technical trade.
U.S. crude rose more than $1 on Wednesday, driven by a technical rally and unexpectedly high gasoline demand, while tensions between Russia and the West underpinned Brent crude prices.While the corner station is likely to lower its price to match its nearest competitors, their price is not likely to go down more than a penny over the next seven to ten days. $3.59 is no longer a ceiling; it's a floor. I wouldn't be surprised if prices went up to between $3.64 and $3.69 by the end of next week.
U.S. crude oil stocks rose more than expected last week, but the build was overshadowed by a sharp spike in gasoline demand, according to U.S. Energy Information Administration data.
The data boosted U.S. gasoline and crude oil prices above key technical levels, and pushed the closely watched and traded price spread with Brent, the European benchmark, to the narrowest point in nearly 7 months.
In the U.S. crude market, "gasoline inventories showed a massive drawdown, which drove WTI to rally past technical levels at $102.75," pushing traders to buy back positions they may have sold short, Baruch added.
U.S. RBOB gasoline settled nearly 3 cents higher at $3.0084 per gallon.
U.S. oil rose as much as $1.21 to a session high of $103.77 a barrel. The contract settled $1.04 higher at $103.60 per barrel.
Brent crude settled 31 cents higher at $107.98 a barrel.
As for where prices stand relative to last year on this date, for the first time all year, if not the first time in at least five months, nominal prices are now higher than last April 9th, when the local stations were all selling regular for $3.55. Let's see, 0.05/3.55=1.4%. As the core CPI has gone up 1.6% over the same time, that means that the real price of gasoline hasn't gone up one bit since last year. That's actually reassuring.