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Well, gasoline production consumes oil, which means that the price should theoretically lag behind oil's price for a period of time at least equal to the time i
by droffel 11y ago
Well, gasoline production consumes oil, which means that the price should theoretically lag behind oil's price for a period of time at least equal to the time it takes to go from crude to a final product.
In addition, most gas stations will buy gasoline futures a few months out to stabilize their costs, and when oil price falls, the cost of the underlying gas purchased is still at the negotiated futures contract price. So it makes sense that the price wouldn't fall in tandem with crude prices.
- deleted 11y ago[deleted]
- murbard2 11y agoThe fact that they are hedged doesn't change much unless they are all hedged. If some of them aren't hedged, they will drive the price down, forcing the other stations to sell their inventory at a loss.
- jsprogrammer 11y ago>In addition, most gas stations will buy gasoline futures a few months out to stabilize their costs, and when oil price falls, the cost of the underlying gas purchased is still at the negotiated futures contract price. So it makes sense that the price wouldn't fall in tandem with crude prices. Only if the gas station is speculating and trying to arbitrage the market. Otherwise, they would reduce the price to reflect the updated price of the underlying futures.