Wednesday, April 16, 2014

Another advance in the gas price war

It's time to check the prediction I made in and repeated in Corner station retreats as predicted in gas price war.
How confident am I in the next prediction?
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.

Gas Buddy shows the national average has continued its rise from $3.58 Wednesday to between $3.59 and $3.60 today.  Detroit's average, on the other hand, has gone down slightly from $3.73 Tuesday and Wednesday to between $3.72 and $3.71 today.  It's performing just as I thought it would earlier this week, when I wrote "Based on the usual seasonal pattern, which has held very well over the past two months, it should decline slightly before going up again."  I'd say that the past two days price pattern is doing precisely that.  As for the local stations, their price is still more than a dime below the metro area mean, and is therefore underpriced based on historical patterns.  The metro average will have to drop below $3.70 to make them priced correctly.  Until that happens, I expect the price to go up next week.
Monday, the corner station charged into No Man's Land, shooting its price up to $3.89, which meant that the price for the next grade up was $4.04.  Egads, $4 gas again!  Meanwhile the stations down the street were still at $3.60.  Tuesday evening, they had all raised their prices for regular to $3.65, while the corner station had dropped what they were charging for regular to $3.79.  My prediction that the neighborhood price would go up to $3.64-$3.69 has come true.  Now all that's left is for the corner station to match the other three, something that should happen by Thursday.

The next question becomes what is GasBuddy indicating for the trend?  The national average has continued up slowly and is now between $3.61 and $3.62.  The Detroit average bounced up on Monday to $3.75 and is now between $3.76 and $3.77.  Even if the latter price ends up being the peak for the week, so long as the slow decline that would follow keeps the price above $3.75, the neighborhood stations will still be underpriced and I would expect the next jump would be to $3.69.  That could happen this weekend to take advantage of Easter weekend travel, but I would think it more likely early next week.  Stay tuned.

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