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. Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline is a fuel product made from refined crude oil. RBOB gasoline often goes by the names gasoline, petro gasoline or petrol.
The Middle East used to have a stranglehold on the top ten producers worldwide, but the U.S. recently surpassed the region’s output. For the most part, this list contains both emerging and frontier markets, which is what makes gas prices so volatile. However, after the invention of the automobile in 1892, gasoline became the main source of fuel for cars and light-duty vehicles. This makes gasoline one of the most important and well-known commodities in the world. Edwin Drake, the first American to drill for oil, discovered gasoline by accident when he was distilling oil to make kerosene for heating. Drake considered gasoline a useless byproduct of the distillation process and discarded it.
The most prolific uses of RBOB gasoline is as fuel for various products such as cars, lawn mowers, generators, pressure washers, and many other common household appliances. While we refer to the liquid as “gasoline” in the U.S., many other parts of the world know it by the term “petrol”, or sometimes “petrogasoline”. From a chemical standpoint, this low-density fuel is very volatile due to its natural makeup and the numerous additives that can be mixed in, some of which include lead, ethanol, and dye.
RBOB gas is a grade of gasoline commonly used in the United States. It is common because it is considered better for the environment and is required in some areas. New technologies such as electric-powered vehicles, for example, could substantially reduce demand for gasoline. This requires refiners to substitute more expensive components into gasoline. California is the largest gasoline-consuming state with over 15 billion gallons consumed every year. Seasonal pollution requirements for gasoline can also lead to disparities in pricing as can weather-related disruptions to refinery operations.
Futures contracts aren’t as popular among individual investors as stocks and bonds because they are generally harder to analyze and trade. Futures involve leverage, which can sink a whole account in days with relatively small moves. There isn’t an easy way to invest directly in RBOB gas with stocks or bonds, but you can invest in energy sector stocks and bonds affected by the same economic forces. There are also options for energy-related ETFs focused on oil and natural gas. Whereas buying an RBOB future could cost thousands, shares of ETFs can cost less than $20.
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Ethanol affects nitrogen oxides (NOx) and toxic emissions as well as Volatile Organic Compounds (VOCs). For RFG (Reformulated Gasoline) to meet VOC requirements, the finished blend must have a low Reed Vapor Pressure (RVP), generally less than 7.0 psi during the summer. As emerging market economies grow, people will purchase more cars and other forms of transportation. This supply/demand imbalance should cause gasoline prices to rise. Due to gasoline’s widespread use, it has come under fire for numerous health and environmental concerns over the last few decades.
You can get access to trading them through most brokerage firms and futures trading portals. Say you want to buy an RBOB contract when the price is around $2.30 per gallon. 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.
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- The most prolific uses of RBOB gasoline is as fuel for various products such as cars, lawn mowers, generators, pressure washers, and many other common household appliances.
- From this point on in the supply chain, the corrosive nature of ethanol is not a concern.
- Traders venturing into the futures market for the first time need to consider the inherent risks…
- Also, the OPEC countries have often had disagreements with one another about production levels.
- A popular way to trade in gasoline is through the use of Contracts for Difference (CFDs) derivative instrument.
Individuals who own a business that is sensitive to gas prices—a trucking company, for example—can use RBOB gas futures as a hedge. If you expect a future increase in gas prices, you can buy an RBOB futures contract, say, at $2.30 a gallon. If the price of gas rises past $2.30, you can sell your futures at a learn how to trade the market in 5 steps 2020 profit.
RBOB Gasoline Price LIVE CHART
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. Experts have different opinions about gasoline prices, but there is a consensus that its price is tied to both crude prices and refinery capacity. Shares of oil companies can also react to other factors including the performance of management and the stock market in general. In this guide to trading RBOB gasoline, we’ll explain how and Best high yield dividend stocks where you can trade this popular commodity. We also list regulated brokers that are available in your country.
A crack spread is the difference between the wholesale price of a refined petroleum product such as gasoline and the price of crude oil. Refineries heat crude oil at temperatures of several hundred degrees and place the boiling liquid into distillation columns called stills. The boiling process produces gasoline as well as other products including kerosene and diesel fuel. Methanol, derived from natural gas, and isobutylene from the butane obtained in the crude oil refining process, are reacted together to form MTBE. Refiners can add it directly into the blending stream as gasoline leaves the refinery. But MTBE, while brokers ratings reviews conditions company description not classified as a human carcinogen, is suspected to be a potential human carcinogen at high doses.
Top Countries by Gasoline Production
Reformulated blendstock for oxygenate blending (RBOB) is a grade of gasoline used in U.S. futures contracts traded on commodity exchanges as a way to speculate on the price of 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 RBOB / Brent crack spread describes the difference between the price of RBOB gasoline and the price of Brent crude oil.
Other production/refining methods include polymerization, alkylation, and isomerization. Gasoline itself was not invented, but rather was discovered as a by-product of the production of kerosene and the refining of crude oil. Since then, numerous developments have improved the quality of gasoline as it is refined from crude oil all over the world. Gasoline can be a particularly nasty thorn in a consumer’s side; prices at the pump can wildly fluctuate due to the dramatic price swings of crude over small periods of time. Another very actively traded crude oil is WTI (West Texas Intermediate). This is another light sweet crude oil that is used in the refining process to create gasoline.