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11 November 2008

Fuel Factor

Is the drop in gasoline prices over? Historically the price at the pump is about 50-60 cents over the futures price of unleaded gasoline on the futures exchange markets. The difference in prices is due to taxes and profit margins charged by the various distributers and jobbers that move the gasoline from the refiners to the gas stations. As oil was in a free fall so was the futures price of gasoline. The price at the pump lagged, but is now closer to the historical average.

In some places in the U.S. gas at the pump is just below $2.00. Today the futures price is $1.29. Either the futures price will rise slightly or gas prices at the pump will drop slightly more. It appears that the drop would be nearing a bottom and will likely rise with any shock in the oil markets.

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