How To Estimate/Forecast The Wholesale & Retail Price Of Gasoline For Your State

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How To Estimate/Forecast The Wholesale& Retail  Price Of Gasoline For Your State

Erick R Williams (2012)

As the price of oil continues to soar so does the price of gasoline.  Of all the products that are distilled from crude oil, gasoline is among the most expensive as it is "lighter" than other distillates such as diesel fuel.

To estimate what your local gas station is paying for gasoline follow these easy steps.  

1.   Go to http://www.bloomberg.com/energy/ to see what the current  is the current Nymex RBOB Gasoline Future cost per gallon. .  This is the fifth item down in the chart..  This is what gasoline is selling for, more or less, on the spot market and other markets as well.

2.  Now that  you have the cost of the gasoline you need to add taxes to that number.  The federal tax is 18.4 cents per gallon.  To find your state gasoline tax go to  http://www.easy-tax-information.com/support-files/gasoline-taxes-by-state-january-2011.pdf  and look up your state.

3.  Add the three numbers together: wholesale price of gas, federal tax, and state tax.

I live in Maryland.  Today the wholesale price of gasoline from Bloomberg is 315.28 which is the cost in cents so it is $3.15 per gallon.  The federal tax rate is 18.4 cents but I round it to eighteen cents.  The State of Maryland adds 41.9 cents per gallon (again, I round to .42).  Now, to get a rough estimate of what my local gas station is paying for a gallon of tax I add the three numbers:  $3.15 + .18 + .42 = $3.75.  Many gas stations sell gas for a penny or two above their cost.  Today, at two gas stations, I saw that the lowest grade was selling for $3.73 so the estimate works pretty well.

By the way, every $10 increase in the cost of a barrel of oil adds approximately .25 to a gallon gas.  This is not exact but it is very close.


erick99 posted Feb 25, 2012
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13 Comments
Zoey2011
Thanks! I've wondered how the pricing worked and didn't realize it was this easy to figure out.
Zoey2011 (rep: 30) posted Feb 25, 2012
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kffight3r
this is a good try but not correct. Using futures prices to determine the spot price or to predict coming prices do not work in many different level. First of all, Future prices will fluctuation with new market information. So back to basics, there are 3 types of derivative traders: cash flow hedgers, arbitrageurs, and speculators and I would say for crude, the major players are hedgers such as airlines. Hence, as futures are exchange traded, the market is set up in a way so that a major player is willing to enter into a contract to hedge risk based on the spot price. Hence, there is no telling on what the actual prices are going to be in the future. If so, no one would enter into future contracts. Also to recalculate the current price, why don't you use the current $/barrel number? Also, localizing your idea by recalculating your current price in your current town do not work either. This is the price paid by major players to import oil. Your town will have its own supply and demands. If you really want to recalc it, take the % change in the current %/barrel and use a ratio analysis to find the new price using the recalculated change.
kffight3r (rep: 712) posted Feb 25, 2012
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gangstabarbie
i spend $120 monthly on gas to commute to work.
gangstabarbie (rep: 9.67k) posted Feb 25, 2012
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erick99
kflight3r, it has actually worked well for years. The futures prices are often what drives spot prices. In practice, this works well.
erick99 (rep: 17.1k) posted Feb 25, 2012
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erick99
gangstabarbie, it is getting very difficult for a lot of folks to budget for gas. I'm a single-dad, single-paycheck kinda guy and it's getting very frustrating. Gasoline has doubled in the last four years and my income is about the same so I feel like I am stuffing my wallet into my gas tank whenever I buy gas. I read that gasoline in parts of California is already at $5 a gallon. Yuck.
erick99 (rep: 17.1k) posted Feb 25, 2012
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Acidbaby
Im glad I work in the oil and gas exploration sector and realize this resembles nothing even close to how the price you pay at the pump is calculated.
Acidbaby (rep: 6.83k) posted Feb 25, 2012
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erick99
Acidbaby, you seem to be making a hobby of following me around. I'm flattered.
erick99 (rep: 17.1k) posted Feb 25, 2012
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Acidbaby
Dont flatter yourself. Just pointing out its not accurate.
Acidbaby (rep: 6.83k) posted Feb 25, 2012
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kffight3r
Mr. Williams,

Your method might work for your city by coincidence but it does not apply to major metropolitan areas. Just leaving theories aside (because again you cant use derivatives to mark spot just like how technical trading does not work as it violates finance fundamentals but it works), the price comes out to about $3.80 but gas is selling for well above $4.25 in West LA.
kffight3r (rep: 712) posted Feb 25, 2012
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Acidbaby
Denver is $3.08 ;)
Acidbaby (rep: 6.83k) posted Feb 25, 2012
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nthsll
Someone 'splain to me how it is that Denver is cheaper than East Texas by .40. Especially when we have 2 refineries within spitting distance of every gas station in the region.

Acidbaby...no offense, but you suck. lol.
nthsll (rep: 12.4k) posted Mar 01, 2012
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erick99
Good question nthsll. Hopefully someone can explain it. I had read that the closer you lived to a refinery the lower the transportation (and other costs). I am curious to hear the answer.
erick99 (rep: 17.1k) posted Mar 01, 2012
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nthsll
That would be the reason for my confusion. My wife is from Arkansas. Best friend lives in Little Rock. Every time I/we go up that way, gas is noticably lower than here. Maybe .20 per gallon.
nthsll (rep: 12.4k) posted Mar 02, 2012
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