I drove past about 10 stations tonight all pricing 87 octane at $1.35. My local Tom Thumb was at $1.41. Everybody was at $1.55 last week, Amoco, SA, Holiday. What's up with this price reduction? Did they all decide not to make a profit or did the refinery cut their costs? The OPEC promise to increase production shouldn't affect us for another couple months.

-- John (littmannj@aol.com), March 30, 2000

Answers

Just as prices spiraled up as supplies seemed to decrease, they will ratchet down as each of the producers and refiners become sure that "product" will be there for them to return to JIT.

However, they will not slide too much only back to the range of the last 10-15 years.

Which is where OPEC wanted them all along. (And so did a lot of other forces. Natural Gas suppliers are one of those forces. Local dealers, distributors and US companies could not make money with $.89 cent reg. gasoline. Truckers and long haulers got into the bind they were in because they used the abnormally low prices as a "baseline" and got whipsawed as prices rose.)

The Futures Market is pointing to that now. (Except in Heating oil which is still at the top area of the 10-15 year range.)

Since Iran even announced that they will ship, its a 50-50 bet as to whether the Cartel will hold. Most likely it will be able to modify a price crash.

OPEC "tested the level of pain" and found it at over $25 /bbl.

Everyone can live and make money at $18-27, so that should be the range........IF.....OPEC can keep all the politics inline. If not, a return to less than $18 is possible.

Interestingly, the US production kicks in with new drilling over $20 in average fields, $25-30 in mediocre and higher for shale.

So one thing becomes obvious, OPEC has little interest in watching the USA....... "do it yourself"....... OR.......worse for them.....move to NATURAL GAS (which many industries will now think about again simply because once sourced, it is a dependable supply).

You will *probably* see assorted reactions over the next months. Some gasoline producers will cut and dump to gain market share for their people.

The question will be "how much can they do that" to leverage the market DOWN? If the Exxons have supply, they will meet the price or trail by pennies. If they do not have supply, they will trail by dimes or more/gal.

Since heating oil is out of the picture and energy demand (in overall BTUs) slumps in Spring, common sense tells you increased supply will lead to a "fast correction" of gasoline prices.

HOWEVER..........remember $1.10-1.29 hi-test was the range for the last decade in many places except Calif. Even Texas seldom went sub- $1.00.

So, you are probably going to see $1.20-1.39 by May 1st everywhere.

DO NOT COUNT ON $1.10 hi-test except during Spring and Fall if OPEC holds.

Others with company owned stores may or may not pursue this.

All over the bean counters will make a lot of decisions daily (which they do anyway).

Many have purchased under new long term contracts and know their own "projected bottom line" six months from now.

There are all sorts of operators in the consumer market. Some have always been more expensive than others. Its like any form of retail.

Most discounters run very "thin" on inventory and buy in the spot market.

There was no shortage. There was a supply / demand inbalance. Some inventory for the refiners was purchased at high prices. Mexico announced they will increase shipments immediately as have others.

With *supplies assured* again, the refiners can return to a "thin inventory* situation that was most directly observed in "heating oil".

And no body will want to be stuck with high priced inventory especially the public companies who might even dump out and replace at lower costs taking a chance that supplies will increase.

What you are seeing now and for awhile will be the elimination of that per cent which would create the horror of horrors for the CFO: reduced PROFITS.

By thinning inventory as much as possible whether on FIFO or LIFO, the Bean counters can avoid an "earnings disaster".

-- cpr (buytexas@swbell.net), March 31, 2000.

Gas jumped/leaped here yesterday 15 cents a gallon all at once every station.

-- Johnny (Not@anymore.net), March 31, 2000.

Regular Unleaded (87 Octane) still holding at $1.69/gal here in Northern AZ. Plus still at $1.79 and Premium at $1.89. No signs of discounting.

-- Flash (flash@flash.hq), March 31, 2000.

Prices are still falling in New Zealand, but nowhere near as quickly as they went up.

-- Malcolm Taylor (taylorm@es.co.nz), March 31, 2000.

Prices stable here in NW Piedmont area of No. Carolina. $1.45 for low test (reg) at the non-majors. Been that price for almost a month.

-- TiredOf (OilSlickArab@ConMen.com), March 31, 2000.

gas prices are edging downward here (south florida)

-- Fernando (Charis@hotmail.com), April 02, 2000.