Gas Pricing Analysis

 

Bloomberg has NYMEX Crude at $68.44 per barrel. There are 42 gallons per barrel.

Cost per gallon of NYMEX crude is $1.6295.

The futures price of  gasoline is 1.9546 per gallon.

NYMEX RBOB GASOLINE FUTURE 195.46

NYMEX CRUDE FUTURE 68.44

Here we have $1.9546/$1.6295 = a 19.95% premium. Previous analysis has pegged the nominal pricing premium as a 15% premium for gasoline.

Either crude is selling for less, gasoline is selling for more or some combo of both.

Things are a bit more interesting with pump prices jumping so much in the past month or so. Typically there is about a 60¢ higher cost for gasoline at the pump versus the futures price. The 60¢ is made up of taxes, distribution and profits.

A fueling station near me has 87 unleaded at $2.959.  Currently there is a larger than normal spread between futures and retail pricing. The spread is now 100¢. We are in a recession and miles driven has been declining for some time as a result.

Takeaway:

These prices are not sustainable. There are tankers full of oil parked out in the ocean. As the economy recovers, there will be a rush of oil to market to meet growing demand. Prices should be relatively stable during the growth phase. If growth is  slow as expected it is not unimaginable that crude and gasoline prices will drop considerably.

Crude Oil & Gas Prices: Futures Prices Equalized

 

A barrel of oil is 42 gallons.

Bloomberg has oil prices as “NYMEX CRUDE FUTURE 45.76” dollars/barrel

Bloomberg has Gasoline as: “NYMEX RBOB GASOLINE FUTURE 128.54” cents/gallon

The conversion of oil is to divide price 42 gallons to get the dollar price of oil. Doing so we get a price of $1.0895238. The conversion to cents per gallon is accomplished by dividing by 100. Doing so we get 108.95 cents per gallon of NYMEX Crude.

NYMEX CRUDE FUTURE price is = 108.95 cents per gallon

NYMEX RBOB GASOLINE FUTURE price is 128.54 cents per gallon

There are two ways of looking at this. Either gasoline is more expensive or oil is cheaper. The one that is probably more correct is gasoline as % more than oil. This is likely the case because gasoline is refined from crude oil. The price of gasoline reflects the cost of refining into a product that has few end uses. Crude oil can be made into many different products.

Moving on… Formula: Change in price / base.

RBOB Gasoline is 17.98% more than crude oil on a per gallon basis.

OR

NYMEX Crude oil is 15.24% less than gasoline on a per gallon basis.

SOURCE: Bloomberg Retrieved: 3/11/2009