Why is it that gas and oil prices can be speculated and have an almost instant p

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   flacoinohioposted 12 years ago

   Why is it that gas and oil prices can be speculated and have an almost instant price change?
   
   I was at a Speedway gasoline station this morning and and while I was waiting in line, the manager was telling everyone in her line that they should buy gas now if they can, because at 10AM she was going to change the price of the gasoline from $3.04 to $3.25.  As far as I know the only thing that is going to happen in the near future is a winter weather advisory in our area and the possiblity of the world ending tomorrow, thanks to a Mayan calender prediction.

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2. 60

   zpaissposted 12 years ago

   Welcome to the "Free" Market.
   
   The prices we pay at the pump are dictated primarily by the wholesale cost charged to the station owner. These prices fluctuate wildly depending on weather, supply levels or random local , regional and global news trends.
   
   For example when a hurricane is formed in the Atlantic and it is projected to hit landfall where ports or refineries are located, that anticipated effect can be immediately factored into the price you pay at the pump, even if it turns out that the disruption ends up being different (less or more) than what actually happens.

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3. 81

   Wayne Brownposted 12 years ago

   Investors buy "oil and gas futures" or commodities that will be delivered at some later specified date.  The buyer is betting the price will increase by the delivery date and a gain can be made by an immediate sale while the seller (producer) is looking to get the highest current bid.  Pork bellies are bought and sold in the same manner.  The Speedway station may have been adjusting their prices upward because the gasoline they would be selling would be going up at the wholesale level...a function of the previous futures market.  Add in the factors of weather, world events, etc. and the spot market price can fluctuate considerably.  The price of a barrel of crude rose over $100 between 2004 and 2008.  During that same period the price of a gallon of gasoline rose by over $2.  Anyone buying futures in 2004 saw significant gains downstream.  Retailers have to be careful with pricing.  If a station buys 100,000 gallons at X price per gallon then the market deteriorates in terms of price before half that purchase is exhausted, the business stands to lose money on the overall sale or breakeven at best depending on where the price lands.  If they stay at the original price, their sales will likely drop so they have to give up margin and hope that they can make up some of the imbalance in the next buy. Most retailers are taking smaller deliveries on a higher frequency so that they don't get stuck with a lot of high priced wholesale gasoline. ~WB

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      flacoinohioposted 12 years agoin reply to this

      So I the gas station buys 10k of fuel on Monday morning and Tuesday morning they raise the price of gas .25 cents, the increased price is profit and/or futures for that particular shipment?

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