Quote:
Originally Posted by BigRedChief
Gas tumbled briefly below $100 today. It was $130 a barrel just a week ago, right? When gas prices went up a couple of $’s they raises the prices at the pump immediately. The price drops 20%-30% and no one is seeing a drop at the pumps.
Can someone who understands the market explain why the price of a barrel of oil goes up, the local gas station raises the prices despite that same gas has been in then tank for a long time. But when the barrel price drops, it doesn’t drop at the gas pump. Why?
|
Because of hedging.
Basically Producers and Refiners buy product at agreed price, these contracts are between 1-3 years and margin dictates profits