The problem is many hands are stuck out before you ever get gasoline to put in your car.
Crude oil is sold on the stock market. Price is set by that. You sell your oil or sit on it depending if you like the price. How much storage you have comes into play.
Wholesale gasoline and diesel price is sold on the stock market. You sell your oil or sit on it depending if you like the price. How much storage you have comes into play.
Rack price is a combination of wholesale price and storage and loading fees. Lots of things come into play here. LIKE...... I have a contract with xxx loading rack to store and load 100,000 barrels of gasoline a month. If I price my gas low it sells fast and I reduce profit. If I price it high it does not sell. Not only am I losing money by not selling I must move my 100,000 barrels a month to keep my contract. You can sometimes find some sellers making great deals around the end of a month to move product.
Stations are not allowed to buy from loading racks. You need to be a jobber to buy. So this jobber adds transportation (couple cents a gallon) and profit to the rack price. State Excise Tax; Federal Excise Tax; State and Local Sales Tax; State Underground Storage Tank Fees get added also.
So now we have said gasoline at the station or jobber bulk plant. You would think we could just add our profit margin to the cost to come up with a pump sales price. WRONG!!!!! While some small stations may do this the big boys do not. They check the price of the station across the street and set their price by that. Does not matter if they paid $2.50 or $2.99 for their gas. If the guy across the street has it for $3.00 they will sell theirs for $3.00
Its a big game of cat and mouse for the big boys and most play it well. But look at Flying J. They went out and bought mega futures on Diesel fuel for delivery months down the road trying to play the game rather than just buying at todays rack price. Great idea as long as the price keeps going up. But it bit them in the butt when the price fell sharply before their future contract ran out. They were buying diesel for say $3.00 on month old contracts and the station across the street was selling it for $2.50. Their only out was to sell of mega shares to Pilot because no bank would touch their mega debt.
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Today's Featured Article - A Lifetime of David Brown - by Samuel Kennedy. I was born in 1950 and reared on my family�s 100 acre farm. It was a fairly typical Northern Ireland farm where the main enterprise was dairying but some pigs, poultry and sheep were also kept. Potatoes were grown for sale and oats were grown to be used for cattle and horse feeding. Up to about 1958 the dairy cows were fed hay with some turnips and after that grass silage was the main winter feed. That same year was the last in which flax was grown on the farm. Flax provided the fibre which w
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