Bending the Third Rail
Because We Should, We Can, We Do
Friday, April 21, 2006
A Simple Question
Oil hit $74+ per barrel today.

It's important to note that this price is for the most premium oil and it's a future's price. I believe in this case this is the price for a future's contract on oil in, like, 2011. Oil being delivered today is oil that was purchased at previous "futures" prices, from maybe two or three years ago.

So here's my question.

Why does gasoline, and other fuel prices, go up at the pump the minute oil future's go up?

Correction: Ok, the new price is apparently for June delivery.

Still.

I don't think oil that is delivered in June is going to hit the pumps for a few months. So why do pump prices move in lock-step with oil futures prices? If oil futures fall, the price of gasoline falls slowly with the decrease of more expensive inventory. But it sure doesn't seem to work that way on the way up, now does it?
Written at 9:02 AM by Greyhair.
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