General Discussion

GreatGazoo

(4,694 posts)

10. Oil is traded mostly as futures

Wed May 6, 2026, 08:36 AM

May 6

Major businesses that uses lots of oil and gasoline have their own trading desks. For example Pepsi. The cost of producing soda is so low that the majority of their costs are delivery (and plastics). They buy and hedge oil futures 6 to 12 months out.

Oil is the biggest commodity in the world economy but it doesn't take much to trigger some big swings on any given day of a war because the Pepsis and Spirit Airlines of the world don't want to get stuck paying way above market when their competitors aren't.

What seems to have bottomed the markets around 3/28 was Trump begging to end the war. Not the doing, just the turn around in attitude. It marked the end of escalation on the US's part.

Yesterday they shrugged off the exchange of fire. China said they will buy Russian oil despite sanctions. The world is realigning in ways that minimize the impact of Hormuz. So there is an element of 'this is the new normal'. Now they want to audit Is rail's nukes so things have really turned and there is momentum toward longterm de-escalation.

Trump is certainly not above manipulating markets but my take is that today's price drop is more a signal of his irrelevance than his influence. TACO is getting replaced by 'what Trump says doesn't matter.'

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