Ron Nelson_

Speculation and the Price of Oil

As the CEO of a solar startup in silicon valley and an interested oil investor (I hold about $200,000 of USO), I have been trying to dig down into the “fundamentals” of spot oil prices. As I understand it, the spot price we usually see in the press is for light sweet crude for delivery a month or so out (August is quoted today). I’m trying to figure out the profits pulled out by the “hands” that oil delivery contracts go thru along the way to consumption. My basic question is, what is the price that the actual producers of that oil charge when they enter into a contract to sell the oil that is then delivered in August by whoever is “holding” it? My assumption is the difference between this “wholesale” price of oil and the final spot market price before delivery is captured by the either speculators or actual consumers of oil who are protecting themselves against price runups.