I was at the Supermarket last week. A quart of milk was $1.30, a half gallon, $1.65 and a gallon was $1.79. How does this relate to Target, WalMart and China? China does not buy crude through middle men. It buys gallons, direct from the producers. Target and WalMart operate in similar fashion using their huge buying power to get the best price. Now how do we operate in the United States? We operate through a cadre of middlemen who lock in the price of gallons, and we buy quarts.
When an oil tanker is loaded, the captain does not know where his load will be dropped, except if he is going to China where his price is set with a negotiated profit. Another tanker captain deals with several U.S. marketeers. His price is also set, but it is higher or lower because there is a bidding process.
Now here's the rub. Once the winning bidder gets the tanker full of oil he goes to his market, the refiners- there are many of them, none willing to take a full cargo. He splits it up into quarts and half gallons. What cost the Chinese $1.79 costs the U.S. market as much as $5.20. That middleman, generally sitting at a computer in New York has made a bundle, and you pay at the pump.