The spot price is what a bulk load of fuel costs to buy right now at a major trading market, for near-immediate delivery rather than under a long-term deal.
Fuel trades in big lots at major market points around the country. The spot price is the price for one of those lots bought on the spot, meaning for delivery now or very soon, settled at today’s market rather than locked in months ahead by contract.
Of all the wholesale prices, spot moves the most. It reflects exactly what supply and demand are doing on that day, in that place: a refinery hiccup, a pipeline delay, or a cold snap all show up in the spot price almost at once. That is why it swings while steadier prices stay calm.
For a jobber, spot matters even when the jobber never buys on the spot market. The rack price (the wholesale price posted for truckloads at a terminal) is built off the spot market, so when spot moves, the rack tends to follow within a day. Watching spot is a way to see tomorrow’s rack cost coming.
In useThe trader sees the spot price jump three cents on a refinery outage and knows the rack, and the jobber’s cost, will likely follow by morning.
See also Rack price, Futures, Basis