Posted in: Gas Prices,
by Patrick DeHaan on Mar 7, 2011 12:47 PM
First off, while oil is many times quoted for the front month contract, meaning for oil delivered in upcoming months, oil is also traded at spot prices, which are current- say if you wanted to buy oil directly from a pumping source. Not only are prices of future crude contracts rising, but current spot prices are also rising. This means that while crude for delivery in later months in rising in price, so are current oil prices. In addition, gasoline is also traded similar to crude- in future prices and spot or current prices.
While futures of oil and gasoline have risen, as spot/current prices have as well. In simple terms, gasoline terminals where stations get their supplies have increased their cost as spot crude oil prices climb. Stations many times raise their prices in anticipation of having to higher prices themselves. Stations know their price for their next shipment will rise and to offset the huge increase, they raise their prices ASAP. Some stations have seen their cost rise $2000 between receiving supplies- a huge cost.
Beyond that, as indicated, future crude can either be cheaper or more expensive than spot prices. While the media is obsessed with quoting crude oil, I look at gasoline spot prices, which reflect the climate of oil prices, and the impact that refineries have on prices. I would urge those who see crude to instead look at gasoline futures. As folks know, we aren't pumping oil into our cars, we're pumping gas, so let's lose the obsession of quoting oil prices.