What does oil have too do with the price of gas in the stock market?

Question

What does oil have too do with the price of gas in the stock market?

Answer 1

Your question doesn't make sense.  "the price of gas in the stock market"?

Answer 2

First off, oil and gas arent traded on the stock market.  They are traded on commodities exchanges.  There are securities that trade on stock exchanges that mirror the price of oil and gas though.  

Gasoline is refined from oil.  A gasoline refiner buys oil from a supplier, refines that oil into gasoline, and sells the gasoline to the market.  

Oil is therefore a cost to the refiner.  Refining it is also a cost.  So if for example, a refiner buys oil for $1 and the cost of refining that oil into gasoline is $.25, the refiner needs to sell the gasoline for $1.25 just to break even.  

Basically then, as the price of oil goes up, then the price of gasoline goes up as well.  

The difference between the price of oil and the price of gasoline is called the crack.  High crack spreads mean refiners make more money.  Low spreads mean refiners make less money.

Answer 3

crude oil is a commodity that can be traded in the open maket. Price of gas is derived from the pice of crude oil ($/barrel)

Answer 4

Um, your question sounds a bit like what does grass have to do with how buffalo eat bananas.

As for what oil has to do with the price of gas (and stopping there in your question), oil is what they make gasoline from.

But then again, if you are talking natural gas, then your question gets all the screwier -- except for the fact that natural gas is often (not always) employed to cook the oil that they make into gasoline at the refinery. When the price of natural gas goes up, then it does cost more to make gasoline.

But the price of natural gas rising or falling otherwise have connection only in the places where both come from the same geological field. The pristine picture is that there is a domelike geological feature with limestone atop a salt zone over a very large sand deposit wherein there is gas gathered at the top, pressed up by a reservoir of petroleum, pressed up by a zone of hot salty water. In that case, the gas and oil are trapped. They will have lines running down to the gas layer, collecting that separately from the oil, and other lines (sometimes in the same well casing) collecting oil from a lower level. In some places it all comes together or the gas comes first and you find those classic pictures of a flame burning a short distance away from the drilling rig -- in which case they find it cheaper to simply burn off the natural gas while they continue down to where the oil is.

Getting the oil is not cheap, but if they find a lot of it, then the costs become proportionally inexpensive. Now if a company produces a lot of oil in relation to the cost of acquiring it, then that company makes bigger profits, so the stock market is favorably interested. A company that has been pumping for a while, yet without finding new fields to produce from, then the oil may fetch the same global price, but the stock market realizes that their profitable days are numbered and lower the market value of the company appropriately.