Gas Prices

As I mentioned in yesterday's post, current rack (wholesale) prices are hard to come by. But I have a source who helped me put together a back-of-the-envelope estimate that the prices for regular unleaded gas at the racks in the area is in the $0.90/gallon range.

The article from Bloomberg about rack prices being as low as $0.12/gallon in the upper Midwest was paywalled yesterday, but I was able to find this free version this morning.

Keep in mind that gasoline is retailed with essentially zero profit. Gas stations make most of their money off of car washes, candy bars, and coffee ... and sometimes even ... repairs. Once you start with the rack price, and add in shipping, plus state tax, plus federal tax ... then you've got to add in the maintenance costs of running the pumps, insurance, labor in the c-store, and there's not much left over. So that $0.90 wholesale price translates into a retail price that's over a dollar higher.

I showed you the chloropleth maintained at GasBuddy earlier in the semester, and here's the current one:

Those darkest purple areas in the upper midwest seem to be mostly in Wisconsin, which matches up with a new twist that I learned from the linked article:

The price decline is especially pronounced for cities at the end of pipeline systems, such as Fargo and Milwaukee.

Cedar City is along a pipeline, not at the end of one. And this is just crazy:

What we are seeing is that a lot of the big pipelines are being used as storage, and the product will just get pushed and pushed until it has no place else to go.

Our pipeline has a storage terminal at the end that can hold 330K barrels, and the one west of town that can hold 200K barrels more. The maximum capacity of the pipe itself is 120K barrels, but typical flow is more like 60K barrels/day. A typical gas station might take 300-600 barrels to fill its underground storage tanks. I do not know how many gas stations are served by this pipeline, but I'd guess about a thousand. So figure 500K barrels is the maximum storage in our neighborhoods. That puts storage in our area at 330+200+500+60=1,090K barrels ... and the industry is so hard up for storage that they're willing to use the other 60K of pipeline capacity to find some more room! Again, I'm guessing at local numbers, but I figure the region served by our pipeline uses 100K barrels per day. So, if all the storage started out empty, and we're down on our consumption by say half, the whole system would fill up to the top with new product again in about 22 days, and they could maybe stretch that by a day by filling the pipeline to the very top. No wonder prices are dropping like crazy.