Last week, I shared how I look at oil markets — focusing on inventory surpluses and deficits to see where prices are headed.
But when it comes to the gas pump, there’s a trick I’ve relied on for years to make sure I’m not paying more than I have to.
It’s saved me plenty of times, though there are moments when even a “fair price” can feel out of reach.
For example, during the pandemic, every station I went to had gas marked around $3.20 — sometimes even higher.
That was way above what the fair price should’ve been based on my formula.
I knew I was overpaying, but with every station charging about the same price, I had to pay it.
That experience reminded me that, while I can’t control prices, at least I know when they’re fair and when they’re not.
In any case, the trick is simple:
I take the last price of gas futures (t and add the taxes here in Mobile — around 56 cents per gallon. When the pump price is close to that number, I’ll fill up. But if it’s way over? I know I can hold off or look elsewhere.
For those of you who want to give it a try, you can do this by looking up the gas futures price and adding your state and local taxes.
The current gas futures contract is /RBZ24, but that will be expiring soon, so you could also use the continuous ticker /RB which will roll over to the latest contract.
If the price at the pump is within 5¢ to 10¢ of the futures price plus your state and local taxes, you can go ahead and fill up, confident that the price you’re getting is a fair one.
Anything higher than that and you might want to think twice — unless we have another pandemic-like situation that is. Sometimes it’s a seller’s market.
For users of Tom Busby’s Roadmap software, here’s the code I use to automatically calculate this for me:
SetLength(3);
SetBucket(.5631,0);
GetValue(/RBZ24,Schwab,Last,1);
Add(0,1,2)
Update(GAS-PRICE,Schwab,Last,2)
If you don’t use Roadmap, it’s just as easy — just take the futures price, add your state and local taxes and look for a price at the pump within 10¢ of that number you come up with.
It won’t change what the stations charge, but at least you’ll know if you’re paying a fair price.
Stay sharp, and don’t let those pumps take you for a ride!
— Geof Smith
P.S. I went LIVE today to share the details of how I am targeting weekly income from one of the most stable assets in the market. Catch your on-demand replay now!
