How do crude-oil futures prices in commodity markets translate into big oil-company costs?
January 8th, 2009
Speculation on the commodity exchanges is driven by feelings of concern about political events and other external factors. The cost of crude oil to refineries is determined by actual supply and demand conditions in an entirely different market. Often long-term contracts between the few major oil companies and foreign governments set the cost of crude. Why then is every speculator-driven uptick in oil-commodity-futures prices reflected in higher gasoline prices at the pump? I don't understand the link between the two markets. Can anyone explain this to me?
Profit.
They charge what they think that the market will bear.
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Profit.
They charge what they think that the market will bear.
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