[ SHOWGSD-L ] Re: Gas
- From: Pinehillgsds@xxxxxxx
- To: pmick@xxxxxxxxx, sally@xxxxxxxxxxx
- Date: Wed, 31 Aug 2005 20:09:38 EDT
In a message dated 8/31/2005 6:37:20 P.M. Eastern Standard Time,
pmick@xxxxxxxxx writes:
Amazing...it's like everything has to go up
immediately...any excuse. Not that this isn't a good one, but it is
IMPOSSIBLE that gas prices could be impacted this quickly!
Actually, no. Oil companies (and some speculators) go into the commodities
market and buy futures (contracts). They also hedge. You can buy and sell
futures, but that takes too long to explain. Anyway, the short answer is
that if you look back 3 or 4 days to what the oil futures were (for crude)
that
price is reflected now, and/or, it's spread out over several days of
production to cushion the blow. The price of the futures contract guarantees
the
company the contract price. If they pay a premium to buy "x" barrels @ $70
and
the price goes to $90, they still get it at $70 + the price of the premium.
If they buy at $70 and the price goes to $60, they can forfeit the premium on
the contract (BUT, THAT PREMIUM WILL STILL BE BUILT INTO THE COST OF THE GAS
THEY PROCURE AND PRODUCE AS A COST OF DOING BUSINESS.).
The oil companies market to the gas stations. If your local station owner
doesn't commit to a certain amount at a certain price, your local gas station
is out of gas in a day or two. So, expect to see an almost immediate
reflection of the futures price in what you pay at the pump.
There's a lot I'm leaving out, but when you look at commodities and futures
markets, realize that we were at 98% capacity before this disaster, it makes
sense. I'm sure there are some price gougers, but buy and large, expect the
prices to fluctuate almost immediately based on the futures price for crude.
Kathy
three generations of Dual Titled Champions live here!
visit _Pine Hill German Shepherd Dogs_
(http://www.geocities.com/pinehillgsds/)
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