tag:blogger.com,1999:blog-2787361367779723757.post7247374228154903913..comments2009-05-19T12:54:13.578-05:00CavemanForecasterhttp://www.blogger.com/profile/10167327392433768443noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-2787361367779723757.post-75301509086964197282009-05-19T12:54:00.000-05:002009-05-19T12:54:00.000-05:00Big T,<br /><br />Sounds like you have more background than I in gasoline retail!<br /><br />Just to answer a few of your the points:<br />- I do think that retail price of gas is ultimately related to supply and demand. But supply and demand is very difficult to understand, measure, and model in real time so I would rather analyze and model gas price itself which is what I (as a gas buyer and investor) care about most. And it is much simpler to model gas price itself if it can be modeled.<br />- I think it is the day to day competitive decision making by retail gas outlets that makes the gas prices have some degree of predictability and momentum or inertia. Even if crude prices go up or down, local retailers can't/won't just immediately adjust their price because of the competition. They do it slowly over time and that is what makes it potentially predictable on some timeframes and seasons.<br />- Looking at the latest 2009 numbers from tonto.eia.doe.gov, regular gasoline accounts for 85% of the gasoline volume of sales (not $ necessarily of course). So from a consumer standpoint who cares about what gas prices are doing, regular gas is definitely most important. Probably not so for the retailer but I don't care about them! But in the end, I am sure the prices go together.<br />- On the fuel oil, I think that would be interesting to look at, I will add it to the list.CavemanForecasterhttp://www.blogger.com/profile/10167327392433768443noreply@blogger.comtag:blogger.com,1999:blog-2787361367779723757.post-35108360886399180222009-05-18T15:38:00.000-05:002009-05-18T15:38:00.000-05:00Interesting subject. I have a few questions. Why don't you think the retail price of gasoline is the result simple demand and supply? We always buy more in the summer. Regarding Paul's comments above,I am not sure how much thought is given to crude pricing when those in the Oil Compaines charged with whoesale prices to the retailers make decisions. I think more thought is given to; volume targests, share of market, dalily profit and loss and what their competition is posting on the street. I bet very little consideration is given to the correlation between "day to day" wholesale pricing and the price of crude oil at least in the short term. Futhermore, I think using the price of "regular" is no longer relevant. What precent of total gasoline pool is regular? I will bet most is mid grade or above. Regular gasoline is used as a "lost leader" posted on the street by retailer to attact customers. I wonder what the graph would look like if one used the "pool price" rather then regular. I dought if it would change the results of your graph much but it would for sure present the real picture.<br />This is the time most people who reguire furnance oil for the winter must make their decisions to purchase futures for the winter. Those who purchased future last year lost their shirt. I would like to see a forecast on retail fuel oil prices for the coming winter. I have a furance and it would help me in the decision I must make in the next month.<br />I am only smart enough to ask questions. I must leave the answers to guys like you.<br />I find your forcasting well done and reader friender. Keep up the good work.<br /><br />Big T.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2787361367779723757.post-28610567933596118042009-05-18T13:47:00.000-05:002009-05-18T13:47:00.000-05:00Paul,<br /><br />I agree, down the road I am sure to look more at crude and gasoline.<br /><br />On UGA, I agree the big money is sure to be arbitraging it, but that does not necessarily mean that they will be trading ahead of the increase in gas prices although you would have to think in general they and the market would be to some degree. It is the old: if everyone knows the market will be up in January then everyone will buy in December which destroys the Jan effect and makes a new December effect. But in this case, these etf's that are tied to something real like crude or gasoline prices, there is arbing that keeps them tied to those real spot prices even if people expect them to go up. So the arbing might actually help here. I can convince myself many ways on this one. But I will look more into the correlations and time lag between gasoline, crude, UGA, USO, etc.CavemanForecasterhttp://www.blogger.com/profile/10167327392433768443noreply@blogger.comtag:blogger.com,1999:blog-2787361367779723757.post-50883197684014177012009-05-18T12:38:00.000-05:002009-05-18T12:38:00.000-05:00Caveman,<br /><br />It'd be neat to see if some variables in the model drawn from the following document improve the fit<br /><br />http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt<br /><br />e.g., supply of crude and refined expressed in days of demand.<br /><br />As far as trading UGA, this definitely feels like an area where the big money has more sophisticated models stat arbing this 24/7, I prefer betting against dumb money.Paul Mineirohttp://www.blogger.com/profile/05439062526157173163noreply@blogger.com