Expert: Gas price swings predictable

Marie Havenga • Jul 21, 2015 at 2:42 PM

It’s not Iraq and it’s not the upcoming holiday. It’s not refinery shutdowns or rotten weather.

Even when wholesale prices remain stable, West Michigan gas prices ratchet up and down like a predictable pinball ricochet. DeHaan said that’s because area stations are ultra-competitive. Unlike most of the country — where there are small fluctuations in price — Michigan, Indiana and Ohio prices tend to swing wildly.

“Take an area like West Michigan and compare it to any other city in the country where there’s not price cycling,” DeHaan said. “The other city would see prices holding steady. In West Michigan, prices would go far lower and go far higher.”

The price cycling pattern typically plays out like we’re seeing now.

As prices bottomed out at $3.50 earlier Wednesday, stations were losing money, according to DeHaan. A leading station then decides to raise prices and others follow suit.

So, now that gas is around $3.95 a gallon, expect a brand to start undercutting by a penny or two. That trend continues typically for a week or week and a half as each station tries to outdo others with a lower gas price.

The competition to churn prices downward continues until no profit margin remains, according to DeHaan — and then, a big jump.

“When they can’t undercut anymore, that’s when you see the price hikes, then the whole war begins all over again,” he explained. “Those little 2-cent declines add up to 40 cents over a week and a half. It’s a mini price war every time.”

Many local motorists waited in line Wednesday as word leaked out that gas prices were shooting upward. Spring Lake Township resident Mike Wheeler said a friend told him.

“I’ve got to save a buck where I can,” Wheeler said as he waited in his red pickup truck at the Admiral station in Spring Lake. “I don’t think it should be going up and down 40 or 50 cents. Is that price gouging? I can see 10 cents, but 45 cents is just crazy.”

Gas prices are hindering family fun, he said.

“I have a boat,” Wheeler said, “and it’s hard to have fun with the family and find things to do when gas is higher.”

Wheeler estimates he saved $4 to $5 fueling up before Wednesday’s spike.

“That’s almost a meal,” he said.

Read the complete story in today’s print or e-edition of the Grand Haven Tribune.

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