Dancing the contango
"When the Crude Oil Price actually goes above the Wholesale Price, will anybody think something might possibly be going on in the market?"
There has always been a correlation between the price of crude and the price of the products that can come out on a "typical slate". (The tricky part, of course, is that elusive "typical slate" because one should always adjust for market demand: Hey, it's winter so we need more Gasoil out of every barrel of crude. And on top of that, you gotta take into account your refinery's configuration, state of technology, etc.) This is the infamous "netback pricing", an inexact science, admittedly.
It should not be possible for the price of crude oil to be generally and sustainably higher than the (sum of the) price of the products that come out of the crude. Otherwise, crude would be un-sellable. Why would you buy something that you turn around and "sell" --after refining it into a slate of products-- at a Gross Loss?
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