System and Method for Estimating Forward Retail Commodity Price Within a Geographic Boundary

Abstract

Embodiments disclosed herein provide a new way to generate estimated forward retail prices for a retail commodity within a geographic boundary that represents a target market. Using estimates for local retail prices, combined with knowledge of current and historical wholesale prices, embodiments disclosed herein enable the creation of a forward estimate of retail prices on fuels for a specific location, time period, and fuel grade. In some embodiment, the process of creating a forward estimate of retail prices on fuels comprises performing a predictive modeling utilizing wholesale gasoline prices, rack markup, retail markup, and taxes on a location, time period, and fuel grade basis. In some cases, the estimated forward retail prices thus generated can be used in a pricing model for price protection services for that retail commodity in that target market.

1 . A method for predicting a forward retail price of a commodity within a geographic boundary over a time period, comprising:
 providing a computer having a processor and a non-transitory computer readable medium storing a set of instructions executable to perform:   
       assessing the components of a retail commodity within a geographic boundary, comprising:
 obtaining a current retail price for a retail location within the geographic boundary; 
 determining a wholesale price associated with the trade of a wholesale product corresponding to the retail commodity; 
 determining a rack markup component associated with transporting and distributing the retail location to the retail location within the geographic boundary; 
 obtaining a tax component associated with the retail location within the geographic boundary; 
 subtracting the rack markup component, the tax component, and the wholesale price from the current retail price to determine a retail markup component associated with the retail location within the geographic boundary; 
 
       and
 creating a forward market curve indicating forward retail price of the commodity for a period of time within the geographic boundary, comprising: 
 determining a market condition associated with the sale of the commodity over a past period of time within the geographic boundary on a monthly basis; and 
 
       calculating an estimated forward retail price for the location within the geographic boundary over a time period based on the current retail price of the commodity within the geographic boundary, the estimated current wholesale price of the commodity, the market condition associated with the sale of the commodity within the geographic boundary. 
     
     
         2 . The method of  claim 1 , wherein the market condition includes contango and backwardation, wherein contango describes a market condition where spot prices of the commodity are lower than further prices of the commodity, and wherein backwardation describes a market condition where spot prices of the commodity are higher than further prices of the commodity. 
     
     
         3 . The method of  claim 2 , further comprising adjusting the estimated forward retail price for the location based on a user-defined event. 
     
     
         4 . The method of  claim 3 , further comprising performing a historical analysis of actual retail price changes due to the user-defined event. 
     
     
         5 . The method of  claim 1 , wherein a wholesale price associated with the trade of a wholesale product is determined based on a futures contract. 
     
     
         6 . The method of  claim 5 , wherein the futures contract is traded on the New York Mercantile Exchange (NYMEX) on that day. 
     
     
         7 . The method of  claim 6 , wherein the futures contract is a gasoline futures contract. 
     
     
         8 . The method of  claim 1 , wherein the estimated total markup is determined by extrapolating historical differences in wholesale prices. 
     
     
         9 . The method of  claim 1 , wherein the rack markup component is determined using a percentage of the wholesale price component. 
     
     
         10 . The method of  claim 1 , wherein the rack markup component is determined using information provided by an information service provider. 
     
     
         11 . The method of  claim 1 , wherein the rack markup component and the retail markup component are determined by extrapolating historical differences between retail prices and wholesale prices as an estimated total markup. 
     
     
         12 . A system for predicting a forward retail price of a commodity within a geographic boundary over a time period, comprising:
 a computer coupled to a network and having a processor and a non-transitory computer readable medium storing a set of instructions executable to perform:   receiving, from a retail computer coupled to the network, a current retail price for a retail location within the geographic boundary;   receiving, from a wholesale market computer coupled to the network, a wholesale price associated with the trade of a wholesale product corresponding to the retail commodity;   receiving, from an information service provider computer, a rack markup component associated with transporting and distributing the retail location to the retail location within the geographic boundary;   obtaining a tax component associated with the retail location within the geographic boundary;   determining a retail markup component associated with the retail location within the geographic boundary;   determining a market condition associated with the sale of the commodity over a past period of time within the geographic boundary on a monthly basis; and   calculating an estimated forward retail price for the location within the geographic boundary over a time period based on the current retail price of the commodity within the geographic boundary, the estimated current wholesale price of the commodity, the market condition associated with the sale of the commodity within the geographic boundary, and the retail markup component associated with the retail location within the geographic boundary.   
     
     
         13 . The system of  claim 12 , wherein determining a retail markup component associated with the retail location within the geographic boundary comprises subtracting the wholesale price, the rack markup component, and the tax component from the current retail price of the commodity within the geographic boundary. 
     
     
         14 . The system of  claim 12 , wherein the retail computer is located at a retail location within the geographic boundary. 
     
     
         15 . The system of  claim 12 , wherein the retail computer communicates with a retail location within the geographic boundary to obtain retail price information.