The number on the tall sign by the road feels like the price of fuel. It is really the last price in a line of them. Before a gallon reaches that pump it has been priced at least four other times, by different people, in different rooms, for different reasons. Each price answers its own question, and the gaps between them are where risk gets managed and margin gets made. Walk them in order and the whole chain stops looking like one number and starts looking like a ladder you can stand on.
Futures: the price of a promise
At the top is the futures price, set on an exchange like the New York Mercantile Exchange. A futures contract is a commitment to buy or sell a standard quantity of a product at a set place and time down the road. Nobody trading at this level is filling a truck. They are locking a price ahead of need and reading the market's mood, since the futures curve is a barometer of where buyers and sellers think prices are heading. For a jobber or a refiner, futures are the tool for hedging, taking some of the risk out of a price that will not sit still. Everything below this rung takes its cue, in part, from here.
Spot: the price of a real cargo, right now
A step down is the spot price, the current price for bulk physical product at the major producing and import centers. Spot trades move in large lots, forty thousand gallons and up, and the price swings hard because it reflects exactly what real product costs and what real demand looks like today. Most operators never buy a spot cargo. They still feel it, because spot is the wholesale market's pulse and it feeds straight into the price they do pay. The choice between buying on the spot market and locking a supply contract is one of the first real decisions in sourcing fuel.
Rack: the price you actually lift at
The rack price is the one a jobber lives by. It is set by the terminal owner for a truckload loaded at the terminal's loading rack, posted by terminal and by product, and it moves every day. This is the wholesale cost of the fuel you put on your own truck, and the industry watches it through benchmarks like OPIS. If you want to understand a jobber's economics, start at the rack price, because almost everything downstream is built on it. Even your fuel tax timing can hinge on whether you buy above or below the rack.
Dealer tank wagon: the price delivered to the door
The dealer tank wagon price, or DTW, is set by a refiner for a truckload delivered to a dealer's retail station. It is the steadiest of the wholesale prices, because the refiner manages it to keep its branded dealers on an even keel rather than letting them ride every twitch of the spot market. A dealer buying on DTW is paying for convenience and the brand, with the fuel showing up at the door. A jobber who lifts at the rack and hauls the load himself is taking on the freight in order to capture the gap between the two.
Street: the price the public argues about
At the bottom is the street price, the retail number on the sign. A retailer sets it to match local conditions and the station across the road, and it can move several times a day in a competitive market. This is where the choice between chasing volume and protecting margin actually gets made, load by load and corner by corner, which is the whole art of pricing the pump. And the number the customer reads includes the taxes stacked on top, which is a separate story from the crude, refining, and freight underneath it. It helps to know what actually goes into a gallon before you argue about the sign.
Where the margin actually lives
Lay the five out as one ladder and your own rung gets obvious. A jobber makes money in the spread between what it costs to get a gallon onto the truck, the rack price plus freight and taxes, and what the gallon sells for, whether that is a DTW number to a dealer or a delivered price to a commercial account. That spread is thin, so reading it right is most of the job. Knowing which of the five prices you are exposed to, which ones you can manage, and which ones simply happen to you is the difference between pricing with discipline and guessing. The pump number the public watches is the end of the story. Your money was made four prices earlier.