Wednesday, December 17, 2014

WOOD-TV on lower gas prices

Much has happened since I posted The return of $2.50 gas.  For starters, the price for regular in my neighborhood has fallen three times in less than a week, first to $2.45 last Friday, then to $2.39 by Monday morning, and again to $2.37 Monday night and Tuesday (the three stations down the block in the evening, then the corner station the next day).  WOOD-TV has noticed the fall in gas prices on the west side of the state in two videos.  I begin with gas prices fall below $2 in Greenville.

For the first time in more than five years, gas prices have fallen below the $2 mark in West Michigan. (Dec. 16, 2014)
Patrick DeHaan of does a very good job of explaining the effects of local competition, which is one of the reasons why gas prices are so low in my (soon to be former) neighborhood, and why diesel prices have not fallen along with gas prices.  I had ascribed the price rigidity to inflexible demand; DeHaan added the effects of low supply from reduced refining capacity, exporting diesel to foreign markets, and competition between diesel and heating oil.  Thank you, Mr. DeHaan; I learned something.

DeHaan makes a cameo in the next video, as he's the expert who predicts gas will stay below $3/gal until late winter.

Prices continue to drop at the pump, with the cost of gas as low as $2.14 per gallon in West Michigan on Sunday.
The woman being interviewed is giving exactly the kind of reaction that people who want good news want to see, delight at lower prices and plans to spend the money for the holidays.  As for DeHaan, he's saying the same thing about gas prices that I've been saying, that gas won't rise above $3.00 until March or April.  I'm sure he's looking at the same thing I am, the RBOB futures.

Speaking of which, Oil-Price.Net shows the spot price of RBOB is $1.58 along with WTI at $55.91 and Brent at $61.06.  I'd like to say these are the floors for these commodities, but I've been consistently surprised at how low they've gone for the past few months.*

Finally, I expect prices at the pump to go down at least one more time, as Gas Buddy displays a Detroit average of $2.42.  The local stations could go down another five cents to $2.32, although I expect them to pause at $3.35 first.

*I plan to post more about the effects of lower oil prices later today.  Stay tuned.

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