Friday, March 21, 2014

Good news, everyone--I was wrong

But I was right first.

In last week's Corner station charged into No Man's Land then retreated, I pulled back on the third thing I expected to happen in latest engagement in the gas war went as expected.
As for the final prediction, that "the next price move that will stick will be a drop to $3.55 or $3.49 in a week or two," I'm not so sure.  Gas Buddy shows that the national average has resumed its climb after stalling out just short of $3.48 last week and is now at a plateau of $3.50.  As for the metro Detroit mean, it hit a low of $3.61 a few days ago then shot up to $3.69 before falling to $3.68 today.  Based on that and today's increases in crude oil and RBOB gasoline, a price drop next week is not in the cards.
I was pleasantly surprised to be wrong in doing so, as the prediction I made two weeks ago came true.  On Wednesday, the three stations down the street dropped their price to $3.56, which prompted me to fill up at one of them.  Thursday, the corner station followed.  The next price change that stuck was indeed a drop to about $3.55.  I should have stuck to my guns on that prediction, although the data a week ago was casting doubt on it.

So, what happened?  It turns out that the Detroit average peaked last week at $3.69 and has declined to $3.60, the price it rose through on February 26th.  Also, the national average's increase slowed at the same time, rising barely half a cent about $3.51 to its peak midweek, then dropping back to $3.51, its first multiday decline since the second week of February.  The neighborhood stations dropped their prices just in time to catch the national trend and to exactly the level they needed to maintain their price advantage.

As for what next week holds, I expect no or little change, with prices remaining between $3.49 and $3.59, except for a charge into No Man's Land by the corner station followed by an quick but orderly retreat.  This is despite today's increase in crude oil futures over the Russia/Crimea crisis.  The trend the past month has been down.  As Reuters reported, Crude oil futures rise on fears over sanctions against Russia.
Brent rose 47 [cents] to settle at $106.92 per barrel, having earlier spiked $1.32 to a session high of $107.77 per barrel. The European benchmark still fell for a fourth week in a row.

A seasonal slump in demand has led to a near 5 percent price slide since the beginning of March, when Brent briefly jumped to a three-month high above $112 as Russia took control of Ukraine's Crimea region.

U.S. crude for May delivery, which became the front-month contract on Friday, settled 56 cents higher at $99.46 per barrel, rising modestly after falling for the week prior.

"This move is an example of headline risk, and so it will be fairly short term," said Chris Nelder, an independent energy analyst and author of Profit from the Peak oil investment book.
Even if gas prices do go up next week to $3.59, they'll still be lower than at this time last year, when they shot up to $3.79.  Lower prices year-over-year and a price drop--this week does deserve Professor Farnsworth.

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