Crude Oil & Gas Prices: Futures Prices Equalized

 

A barrel of oil is 42 gallons.

Bloomberg has oil prices as “NYMEX CRUDE FUTURE 45.76” dollars/barrel

Bloomberg has Gasoline as: “NYMEX RBOB GASOLINE FUTURE 128.54” cents/gallon

The conversion of oil is to divide price 42 gallons to get the dollar price of oil. Doing so we get a price of $1.0895238. The conversion to cents per gallon is accomplished by dividing by 100. Doing so we get 108.95 cents per gallon of NYMEX Crude.

NYMEX CRUDE FUTURE price is = 108.95 cents per gallon

NYMEX RBOB GASOLINE FUTURE price is 128.54 cents per gallon

There are two ways of looking at this. Either gasoline is more expensive or oil is cheaper. The one that is probably more correct is gasoline as % more than oil. This is likely the case because gasoline is refined from crude oil. The price of gasoline reflects the cost of refining into a product that has few end uses. Crude oil can be made into many different products.

Moving on… Formula: Change in price / base.

RBOB Gasoline is 17.98% more than crude oil on a per gallon basis.

OR

NYMEX Crude oil is 15.24% less than gasoline on a per gallon basis.

SOURCE: Bloomberg Retrieved: 3/11/2009

TV SALES JANUARY 2009

Bloomberg has an interesting article on TV sales.

Jan. 30 (Bloomberg) -- With her new 46-inch flat-panel television mounted above the fireplace, Theresa Nelson is ready for the big game.

“I wanted a new TV before the Super Bowl,” said Nelson, a 45-year-old brewery engineer at MillerCoors LLC. She paid $1,499 for the Samsung Electronics Co. TV at the Best Buy in Greensboro, North Carolina. The TV, which replaced her 10-year-old set, was $600 off and better than Circuit City’s price, she said.

For the full article visit Super Bowl May Spur Fewer TV Sales as Retailers Fight Slump

THOUGHTS:

• Demand is falling
• Prices are falling to match lower demand with the hope of increasing unit sales
• If sales fall too much, capacity utilization at plants will break below the profitability point
• Expect retailers to push computers to try to stem revenue losses from slowing television sales
• Retailers will push more netbooks and second computers as well as accessories that enable consumers to do more.

KROGER PRIVATE LABEL PUBLICATION

Mail Call via the United States Post Office

In today's mail was a publication from the Kroger Company. Kroger is our main supermarket. The publication is called "mymagazine™", "exclusive extras for our best customers"

What is so remarkable about this?

• All products are private label [available exclusively at Kroger]
• 12 coupons
• 20 pages including front and back cover.
  

Main themes

• Indulgence [vanilla cream puffs / Chocolate Oranges]
  
• Holiday [stuffed olives / Black Tiger Shrimp Ring / spiral sliced ham]
• Commodity products [frozen fruits / cheese]

Takeaway

• These private label brands are only available at Kroger
• Kroger wants to drive traffic to their stores. To drive occasion sales would increase sales at competing retailers. Using products and brands only available at Kroger accomplishes the former rather than the later.
• Calling something "exclusive" increases the consumer interest [consumers like to be on the inside / special]

What are your thoughts?

GASOLINE PRICE DROP

Just saw this data from Bloomberg.

Retrieved on 12/09/2008

PETROLEUM (¢/gal)

PRICE* CHANGE % CHANGE TIME NYMEX HEATING OIL FUTURE 149.39 .35 .23 01:52 NYMEX RBOB GASOLINE FUTURE 95.38 -.80 -.83 01:10

The futures price of gasoline is less than $1. Most states have fuel taxes of between roughly 30 and 50 cents per gallon. Figure in about 10 cents a gallon for marketing, distribution and profits. 

UPDATE: from API

Some facts:  As of October 1, 2008:

• The nationwide average tax on gasoline is 48.4 cents per gallon as of October 2008, down 1 cent from July 2008.  
• The nationwide average tax on motor diesel fuel is 53.6, a decrease of 2.8 cents from the July 2008 study. 

Graphical representation of fuel taxes in July 2008.

The price of gas is going down, down, down. This is an amazing turn of events from June when prices were spiking at above $4 as a national average.

QUESTIONS FOR DISCUSSION

What are your thoughts?

What price do you think the national average price will ultimately fall to?

What month will the lowest average price occur in?

  

OUT-OF-STOCKS

Kroger has both Coke and Pepsi two-liter bottles on sale. Three times in less than a week there was an out-of-stock [OOS ] on the product I was seeking to buy.

Day one had and OOS on the floor.
This situation had me asking a customer service manager to check the back room. Product was found. Two units purchased.

Day two had an OOS on the floor.
This time I ask the manager on duty if he would kindly check the backroom This time there was a store OOS. Since this brand and type was what I wanted I went to another Kroger location less than a mile away. They had it in stock. One unit purchased.

Day three OOS after a partial selection.
Went to the second Kroger that had preferred product in purchase number two. This time my goal was to buy two units as today was the last day of a 4/$5 sale. This time there was only one unit left of the preferred product. Bought that one and also bought a similar product from the other guy.

Consumer Behavior: Sometimes the consumer will...

• Flavor Shift
• Store Shift
• Brand Shift
• Not Buy

The Bottom Line
Coca-Cola, CCE, and Pepsi, PBG, need to do a better job on in stock and availability for their products.



What has been you experience with out-of-stocks on food, beverages and consumer packaged goods products?

What did you do?

BLOOMBERG: "OPEC Defers Decision on Output Cut, Seeks $75 Oil "

OPEC has deferred a decision on reducing output quotas. Oil is in the low $50 range right now. This past summer it nearly hit $150 a barrel.

The United States, the largest economy in the world has entered a recession. Since the U.S. is such a large part of the world economy the rest of the world suffers as a result. The U.S. is a major consumer of other nations exports.

One of the best things to happen in the past four months has been the rapid decline in the price of gasoline. Oil is a major component in the price of gasoline. The reduction in gas prices has left more money in household budgets.

As oil falls, gasoline falls, consumers have more money to spend. As consumers resume spending the recession will slowly end and the economy will begin growing again.

Consumers need lower prices to restore their confidence in the economy and in their financial position. If OPEC were to cut output to increase prices in the short term, it is likely that the recession would linger for a longer period of time. At the same time many of the people calling for alternative energy sources will have the ears of more people. Investment in alternatives will likely increase thereby reducing demand for OPEC oil.

OPEC should hold output steady and allow prices to fall. This will get the world economy back up to speed faster. Output cuts only delay this recovery. Any production or quota reductions make OPEC look bad and gives those opposing them greater power, force and leverage. Taking action to increase prices is the wrong decision for OPEC to undertake.


What are your thoughts?



Sources for you to explore

Bloomberg: Energy Prices
Bloomberg: OPEC Defers Decision on Output Cut, Seeks $75 Oil

INCOMPLETE ANALYSIS: WHOLE FOODS

When you look at only a few metrics and make analysis from that, you have a higher risk of being wrong. It may well turn out that Whole Foods is really struggling, unfortunately the analysis in the article is incomplete.


Whole Foods in a Whole Lot of Trouble
November 13, 2008

Whole Foods (NASDAW: WFMI) is the worst performing supermarket chain in 2008, according to Geezeo’s Main Street Spending Index.

Whole Foods has had a cult like following amongst upscale urban professionals. Aspirational shoppers even mocked their own spending by nicknaming Whole Foods: “Whole Paycheck”. Given the economic instability though, customers are staying away from Whole Foods in droves.

The table below compares the drop in average consumer spending per visit at major retail grocery chains year-to-date. Whole Foods spending dropped 19% from January to October 2008. The winner was value-branded Stop & Shop (AHONY.PK) . Stop & Shop had a slim 1.54% decrease in customer spending. Not bad for an economically volatile year.

Statement: "Whole Foods spending dropped 19% from January to October 2008."

Did the total revenue of Whole Foods really fall that much? No, basket size fell.

The article also indicated that Whole Foods has a small basket size in relation to other grocery chains. Why might that be? Whole Foods shoppers may have smaller basket sizes [average transaction] because people buy fresh products more frequently. The more times a customer is in your store the more opportunities you have to gain incremental [unplanned] sales.

The real question is... What is happening to shopper frequency? The article did not address this metric. This is a critical measure in food retail. If visits increased, it is possible for basket size to shrink but for total sales to increase.

Traditional Grocery

The typical shopper at Safeway and Kroger is a once a week shopper who is hurried for time and shops there to get it all done at once. This means the visits are stable and basket sizes are typically larger. If a customer decreases frequency at these chains there is the possibility that sales will be pinched.

Increasing & Maintaining Store Visits

Typically you can only sell to customers that are actually in your store. The Internet is changing this to some degree, this is minuscule at present [for supermarkets, grocery]. Many food retailers have created email newsletters to spur visits thereby getting a customer into a store where they will make actual purchases.