MTBE gives water an unpleasant taste and can render large quantities of groundwater unfit for human consumption. The concern is that MTBE gets into the water supply from leaking underground storage tanks or from gasoline spilled onto the ground. Therefore, options traders must be right about the size and timing of the move in gasoline futures to profit from their trades. Gasoline options contracts expire three business days prior to the expiration of the underlying futures contract.
Forms EIA uses to collect energy data including descriptions, links to survey instructions, and additional information. State energy information, including overviews, rankings, data, and analyses. Comprehensive data summaries, comparisons, analysis, and projections integrated across all energy sources. Lawsuits continued, and oil companies asked for transition assistance in the form of $2 billion and liability protection while they phased out MTBE.
RBOB Gasoline Price LIVE CHART
This requires the removal of some heavy molecular weight and high boiling point components as well. Gasoline futures contracts expire on the last business day of the month prior to the delivery month. At expiration, traders must either accept physical delivery of gasoline or roll their positions forward to the next trading month. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your the best online brokers for 2020 money.
When the crack spread is elevated and the price is well above the cost for refiners to convert Brent into RBOB, there is a large incentive to purchase and refine as much crude oil as possible. There are two components to the profit margin that a refiner can achieve. The first is the difference between the price of crude oil and the price of gasoline.
Gasoline represents nearly half of the petroleum products produced, which ranks it as the number one product recovered during the refining process. RBOB became the benchmark in the United States largely because of legislation banning gasoline with the chemical MTBE which was found in unleaded gas prior to legislation. MTBE was tied to the pollution of groundwater which threatened the health and safety of humans and wildlife. Since the legislation was introduced in the United States, RBOB futures has even become the new benchmark gasoline futures contract.
Certain options strategies, like vertical spreads, have predefined profits and losses. Prices for RBOB gasoline futures logically have a high degree of correlation with crude oil since gasoline is distilled from crude. Thus, some of the global supply and demand factors for crude oil also apply to RBOB.
The weekly 2 top value stocks to buy right now chart of the RBOB Brent crack spread shows that at times the crack was as high as $28 dollars per barrel and as low as -$5.5 per barrel. When the crack spread is negative there is no incentive for refiners to purchase and refine Brent oil. This generally occurs during a recession or Brent oil is artificially buoyed by supply disruptions.
What It Means for Individual Investors
Listed contracts conduct trading throughout the next 36 consecutive months. As mentioned above, gasoline is a natural by-product of crude oil. For every three barrels of crude oil refined, approximately two barrels of gasoline can be salvaged. Refining this essential fuel can be done in a variety of ways, with the most popular being forms of “cracking”. Cracking is a process whereby hydrocarbon molecules are broken up by heat and pressure into lighter molecules. There are various forms of this process, including thermal cracking (the most popular) and catalytic cracking.
Regional Dashboards & Data
Much of the U.S. gasoline supply comes from refineries in the Gulf Coast region. As a result, weather events or supply congestion in that area can cause short-term delays or price spikes. RBOB is Reformulated Blendstock for Oxygenated Blending, a mix of petrochemicals intended to be mixed with ethanol to produce finished motor gasoline. Increasing demand for gasoline in Asia, Latin America and the Middle East often outpaces supply from those regions. Demand for gasoline has been steadily declining in Europe and the United States. Now let’s look at the import volume for the CBOB for the rest of PADD 1 that does not require the reformulation.
Global Recession
- Crack spreads are a way to measure the margins for refining crude products and can serve to predict how tight the supply of products is in different markets.
- This requires the removal of some heavy molecular weight and high boiling point components as well.
- New technologies such as electric-powered vehicles, for example, could substantially reduce demand for gasoline.
- The term “reformulated” describes gasoline that does not have any MTBE “Methyl tert-butyl ether”.
Options are also a derivative instrument that employ leverage to trade in commodities. RBOB is more expensive to refine—more energy and more effort are required to pull some of the additional hydrocarbons out of the fuel. Producing reformulated gasoline using ethanol presents live forex rates and currencies 2020 problems for refiners.
RBOB’s price is most sensitive to supply-and-demand changes for the commodity. For example, hurricane weather in the Gulf of Mexico can have a big impact on RBOB’s price because it affects the supply produced by the many U.S. refineries in the gulf. Drivers use more gas in the summer, which also affects the price because of the increase in demand. RBOB stands for Reformulated Blendstock for Oxygenate Blending, a component that is used to create reformulated gasoline. Reformulated gasoline produces less smog than other gasoline blends. As a result, around 30% of the U.S. market requires gasoline to be reformulated.
When it comes to crude consumption, the U.S. uses more than the next four highest consumers combined. It is also important to note that our consumption is roughly twice that of our production, making our nation so dependent on foreign oil. You can use the CME Group website or the Nasdaq website to find the current price of a gallon of RBOB gas.