What is the Real Price of Gasoline – $1.78/gal

Gasoline prices have been falling almost every day now. As of the date of this posting AAA reports the national average price for gasoline is $2.71/gal. A year ago the average was $3.52/gal. So who actually determines the price for gasoline and how can you predict what the future price?

 The actual price of gasoline is mostly determined by both the price of oil and more specifically the RBOB futures. RBOB is a futures market benchmark that is traded on the New York Mercantile Exchange, the CME Group’s Globex and ClearPort electronic trading platforms. RBOB stands for “Reformulated gasoline Blend stock for Oxygen Blending”, you and I just call it gasoline. A single futures contract of RBOB represents 42,000 of gasoline delivered to the port of New York in a future month. RBOB contains 10% ethanol and is prepared so that a purchaser can get another 10% ethanol added right at the point of delivery. The price of RBOB is quoted in US dollars. A strong dollar tends to lower the price of oil and gasoline. The US dollar is on a real up trend compared to all other world currencies.

 RBOB

 

 

 

 

 

 

The above futures chart shows the trading history of RBOB since September 2014. Today “front month” contract (January 2015 delivery) is about $1.78/gal. If you look at the RBOB futures contract price for January – June 2015 you’ll see that at the moment the market thinks we’ll have really cheap gas for the next 6 months. Of course, the price of RBOB could become quite volatile based on the price of oil and geo-political events. But for now we’ll enjoy it.

 Now that you know the core cost of gasoline you can start determining whether your local area is giving you the best deal. There are places in Oklahoma currently selling gas for $1.99/gal, our local price here in Florida is $2.69 and seems to drop every few days. Keep in mind that the “costs” of your gasoline includes taxes, transportation costs and retail profits. I can already tell that our local price of $2.69 will continue to drop before January to possibly the $2.40 – $2.50/gal range.

 

 

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