One choice is to buy it in advance, either by taking physical possession of oil and storing it or by buying a futures contract. The other choice is to buy it as needed. If oil is purchased as needed, the price in the Northeast is typically based on the spot market price that day. Information about future shortages or supply disruptions affect the spot price which, in turn, affects the prices at the refinery to terminal, terminal to wholesaler and wholesaler to retailer levels. When supplies are low, this price increase is exacerbated because there is no low cost supply around which a particular dealer may use to lure new customers.
Similar pricing is used in gasoline.
In addition, gasoline retailers have relatively low margins and must pay for their gasoline at the time of delivery. Thus, the only way to pay for tomorrow s shipments of gasoline is to raise the price on the supply a dealer got yesterday. From a law enforcement standpoint, we stand ready to vigorously enforce the federal antitrust laws, but doing so is a massive task. We would have to review pricing at hundreds of sale points for heating oil and thousands of sale points for gasoline in such an investigation. The more effective route may be prevention.