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gary lammert

Gasoline prices are a fragment of one of the six piece of the economic puzzlle:

A Completed Fibbonocci Third Growth Sequence on Friday 26 August 2005

The fractal evolution since October 2002 strongly suggests that there are very real and very simple quantum number fractal laws that underlie the macroeconomy. This discovery will be little consolation to the turmoil that is about to unfold over the next decade.

August 24 (Wednesday's) and August 25 (Thursday's) trading days once again demonstrated on a 5 minute unit fractal level, the recurrent precise fractal theme of x/2.5x/2x-2.5x - that pervades the economic universe.

For the Wilshire 5000 the base was about 17 five minute units. The three sequential growth fractals were 17/42/34 of 34 before the fall on Friday morning. The lateral 'skeletonized' evolution of this fractal sequence suggests the final lower (very lower) high is close at hand. Friday August 26 is the Fibonacci 85th day of a 52/130/85 daily sequence dating since August 2004.

1.62 times 52 equals 84.24 days.... If growth sequences follow idealized
Fibonacci related fractals, Monday 29 August 2005 will break lower in
a nonlinear manner. A deluge is coming.

Gary Lammert The Economic Fractalist http://www.economicfractalist.com/

NOTR

Hopefully as your students look at the economics of the gas business, they also get dipped in the hidden cost of doing business, state and federal regulations, all which interfere with the free market mechanisms.

Keith

This image (http://www.mjervin.com/image6.gif) is a pretty good indication of how retail gasoline prices are built up. Crude producers sell it to refiners, who turn crude into gasoline (and other things). Gasoline is sold by refiners to marketing companies, whose job it is to distribute it out to gas stations. You can think of this layer as the wholesale business. Then taxes are a percentage (over 100% in most places, over 1000% in Europe) of the wholesale price paid by the gas station. Add a margin of about 10-20 cents a gallon to get the gas station's final retail price.

Most gas stations make more money on beer and cigarettes (and *cough* porn) than on the gas itself, which is why they all turned into convenience stores (big, nice pretty ones) at about the same time about 10 years ago. The gas is just a way to get you in the door in most cases.

Keith

This reminds me of another piece of good advice for price sensitive gas shoppers out there. Never buy midgrade or "Plus" gas. That gas in the middle pump is where the gas station makes almost double margins because of how they charge for it. The industry in general calls it "yuppie gas" because of who buys it. Poor people buy regular. Rich people in rich cars buy premium. Yuppies think premium is too fancy and overkill but they still want their car to have "the good stuff" so they buy the midgrade.

Midgrade gas is nothing more than a 60-40 mixture of regular and premium, usually mixed in the actual nozzle you are spraying into your car.

Typically you will see that regular will be $2.50/gal and premium will be $2.70/gal or so. Midgrade will fall somewhere around $2.65 or so, implying that it is closer to premium. If you look at the octane ratings on the pumps though, you will see that regular is 87 octane, premium is 92 octane (93 in some states), and midgrade is 89 octane.

If you feel you *have* to have midgrade gas, pump 10 gal of regular gas into your car in 1 transaction, pay for it, then pump 5 gal of premium into your car and pay for it separately. You'll get the same 2/3rds-1/3rd mixture and pay about $2.57 instead of $2.65 for it.

James Stephenson

I had heard that Gas Stations, earn less than 10 cents a gallon profit from the gas. Heck, if you lease a shop from say Shell, you get 2 cents per gallon sold. 20 cents profit per gallon, if that were true there would be more gas stations, so many that eventually the price would fall.

Anyway, I am not sure if this is true or not, but where is this guy pulling 20 cents from?

James

Dave Tufte

I loved Keith's comment about midprice gas. I've just learned a new trick.

After reading all these I'm inclined to think that the correct answer is that arbitrage forces the rate of return on gas stations to stay at the same level as the price of gas rises. The result is the convenience store phenomenon (noted by Keith), and also the disappearance of most family owned gas stations in the 1970s (when they became lousy businesses relative to other sorts of shops).

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