Tuesday, September 06, 2005

Explanation for lack of posts

Just wanted to apologize for paucity of posts in recent days. The combination of watching too much Katrina news, classes starting, and network problems have combined to eat up any posting time.

I think the computer problems are past so hopefully I will be back posting either tonight or tomorrow.

BTW if you have not done so, please donate to the charity of your choice for the hurricane victims.


Gas Fairy said...

Dear Finance Professor,

I have an off-topic request for a future blog topic. I'm attempting to determine the fair value of gasoline in my town, York, Pennsylvania. Bloomberg has the spot price of unleaded gasoline trading at 2.1325 and the NYMEX is showing the near month futures contract trading at 2.13. However, the Wall Street Journal Data Bank is showing that Gasoline, "Unleaded, Reg., NY gal. Non-oxygenated" closed on Friday at 2.5087 and "Gasoline, Unleaded, Reg. NY gal. Oxygenated" at 2.7237.

I believe that Pennsylvania state gas tax = 30 cents and federal tax = 18 cents.

I'm guessing that a reasonable cost of carry, transportation, insurance, vendor and retailer profit is around 15 cents.

Ignoring the WSJ numbers (because I don't understand the apparent anomaly) I'd like to add the spot price + taxes + 'carry' = 2.13 + .48 + .15 = 2.76 to get a "fair value" for the retail price of gasoline at the pump today. Why is the price still $3.29 in my area and what are those Wall Street Journal Data Bank numbers? Thanks for any help better understanding this rough "fair value" approximation.

FMF said...

I'm still matching donations. See:



Anonymous said...

Fair value has nothing to do with past costs. It depends on what the market will bear.

One factor the market will consider is the potential for a shortage. In other words, much higher production and delivery costs in the near future.