Crude oil futures for delivery way-way-way out into the future, closed today under $90\barrel (December 2018 closed today at 89.86).
Knowing that the US printing presses are running full-tilt, 24\7, printing greenbacks, it isn’t a long-shot to think that the downstream inflationary affects on the U.S. dollar will make $90 barrels of oil – 7 YEARS FROM NOW – seem kinda cheap.
If you were a small to mid-size consumer\refiner\retailer of oil and its by-products (uh, by this I mean gasoline for cars), would it make sense to offer your customers $3.50 gas for the next 5 years…no strings attached except a minimum commitment of say, a 10 gallon purchase\month?
You could lock in fickle customers for half a decade and still make a profit….that’s good cash-flow, right?
Granted you will have to tie up capital in the form of of futures contracts’ margin…but borrowing money is cheap right now (just as The Fed).
Let me know if I am off base here…seems like a slam-dunk to me for any entity that could move this product.
C
Well done analysis of the retail gas market. My family owns a couple of gas stations and we are constantly getting our margins sueeezes
Nice analysis but that trade would be pretty red right now, plus it looks like crude is going a lot lower.