RBOB Gasoline: Understanding One of the Most Important Commodities in the World

To generate an “apples to apples” comparison, the crack is quoted in US dollars per barrel. To create this quote, RBOB gasoline is converted into US dollars per barrel. This can be accomplished by multiplying RBOB gasoline by 42, which converts the cents per gallon quote into a US dollars per barrel quote. You can then subtract the price of Brent crude oil from the price of RBOB Trade copper gasoline to derive the crack spread. Crack spreads, which represent the price difference between products and crude oil, can be used to determine the relative value of various petroleum products for refineries to produce.

If ethanol is pushed through a pipeline, the water that it attracts will corrode the inside of the pipes. If it’s mixed with gasoline at the refinery, every pipe and tank that it passes through will be subjected to higher levels of corrosion. Long ago, in the bad old days when our cars were big, fuel was cheap, and we actually put lead in the gasoline, there was conventional gasoline. Crude oil varieties and the technology available for refining them can lead to different gasoline products and pricing from one refinery to the next.

1. This means most investors want to liquidate positions prior to the expiration of the contracts.
2. RBOB is more expensive to refine—more energy and more effort are required to pull some of the additional hydrocarbons out of the fuel.
3. New technologies such as electric-powered vehicles, for example, could substantially reduce demand for gasoline.
4. Ethanol affects nitrogen oxides (NOx) and toxic emissions as well as Volatile Organic Compounds (VOCs).
5. State energy information, including overviews, rankings, data, and analyses.

The elimination of lead in gasoline and the introduction of catalytic converters in the mid-80s was only the first step in cleaning up the air. Other compounds, such as sulfur and benzene, still made it past the catalytic converter and into the air. Refiners have been adding MTBE to gasoline since 1979 to raise gasoline octane ratings and help prevent engine knocking. MTBE also displaces gasoline components such as aromatics— e.g., benzene and sulfur—optimizing the oxidation during combustion. Futures contracts aren’t as popular among individual investors as stocks and bonds because they are generally harder to analyze and trade.

Commodities and Trade Tariffs

The consumer uses the end product that is created for them by the refiner. The refiner’s role in the process is very important and sometimes is lost when traders evaluate the energy sector. Gasoline is the most widely used petroleum product in the United States. In investing, RBOB gas is the benchmark for gasoline on the futures market. Minimum contracts are equal to 42,000 gallons (1,000 barrels) and trade for the value per gallon. That means you need to multiply the quoted price by 42,000 to know what the contract cost the relationship between interest rates and bond prices 2021 will be.

What Is RBOB Gas?

This type of gasoline is used as the benchmark for gasoline trading on the Chicago Mercantile Exchange. The term “reformulated” describes gasoline that does not have any MTBE “Methyl 417 usd to try exchange rate today tert-butyl ether”. An important factor to understand about gasoline is its octane rating. Internal combustion engines, like those found in automobiles, burn fuel in controlled processes. The higher the octane rating, the higher the compression rate, with a more efficient fuel capable of a higher output than those with a lower octane rating.

A crack spread is the difference between the wholesale price of a refined petroleum product such as gasoline and the price of crude oil. RBOB is a distillation of hydrocarbons from crude oil that is used to produce gasoline fuel. After it is distilled from petroleum, RBOB is blended with ethanol to produce reformulated gasoline. The All Futures page lists all open contracts for the commodity you’ve selected.

That means you only need 12% of the total investment down to buy the contract on margin. Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. Mr. Pines has traded on the NYSE, CBOE and Pacific Stock Exchange. In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts. Much of the U.S. gasoline supply comes from refineries in the Gulf Coast region.

Gasoline Basics

For those wanting to trade markets using computer-power by coders and developers. Forms EIA uses to collect energy data including descriptions, links to survey instructions, and additional information. Low Volatility ETFs invest in securities with low volatility characteristics. These funds tend to have relatively stable share prices, and higher than average yields. Reformulated gasoline is required in certain areas to reduce smog per Clean Air Act amendments. RFG is required in cities with high smog levels and is optional elsewhere.

The risk of loss in online trading of stocks, options, futures, forex, foreign equities, and fixed income can be substantial. Before trading, clients must read the relevant risk disclosure statements on IBKR’s Warnings and Disclosures page. Reserves, production, prices, employment and productivity, distribution, stocks, imports and exports.