Tuesday, August 6, 2013

The corner station wins a battle in the gas war by dropping its price

In Gas prices begin August by bouncing off the post-spike bottom, I described how the local gas war followed the usual scenario last week.
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.
That was last Friday.  Sunday, the corner station dropped its price for regular to $3.49 while it sold premium at 15 cents higher, $3.64, instead of the usual dime.  I thought that was odd.  Monday morning, I found out why.  The three stations down the street were selling regular for $3.55 and premium for $3.65.  That meant the corner station was undercutting the competition by the usual one cent on premium, but six cents on regular.  This morning, the three stations down the block relented and dropped regular to $3.49.  That's not the usual scenario.  Usually, it's the corner station that tries to raise prices, not lower them.

I concluded the previous post by copping out on a prediction.
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.
Brent dropped to $108.18 today, so the lower price at the pump is no surprise.  It's also below the predicted price of $3.54, the national average of $3.63, the Michigan average of $3.60, and the Detroit average of $3.53.  I can't complain.

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