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Sunday, September 11, 2005

Gas Blogging

Here's some encouraging news from the Wall Street Journal:
The weekly difference between the average retail gasoline price published by automotive club AAA and gasoline futures on the New York Mercantile Exchange hit $1.078 Friday, the widest spread since January 2000, when the driving club began publishing data collected through the Oil Price Information Service, a New Jersey-based industry-research firm. Since then, the spread has averaged 62 cents, with the futures trading at a discount because they essentially represent a wholesale price that excludes taxes, transportation fees, service-station markups and other costs.
Click here for the whole article (online subscription required).

For the unitiated, a futures contract is a contract to buy (or sell) a commodity at a predetermined price at some ficed date in the future. So, they give a good indication of expected future prices of some commodity. The fact that gas futures prices are trading an increasing discount to current (i.e. "spot") gas prices could be an indication that prices are in for a fall. It might not be a big one, but it's still encouraging.

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