I have to agree with Steven. The technique they are employing is known as hedging, which means they are probably buying large quantities of gasoline on so-called spot markets at a fixed price months, sometimes years in advance.
It works similar to buying call or put options on stocks, where “calls” bet on higher prices and puts anticipate lower prices. There are two parties to this type of agreement, one being the holder of the option, who has to be prepared to deliver the stock on the expiration day regardless of the market price and the other, the beneficiary, who pays a fee for the right to exercise this option on the expiration day.
The holder of these options makes money when on the expiration day, let’s say, “calls” are “not in the money”, meaning beneficiaries of call options can buy a certain stock cheaper on the market rather than through exercising their options. Consequently, they let their options expire and the holder earned his fee.
On the other hand, the holders of these options can loose money when, let’s say, “calls” are ”in the money”, meaning holders of these “calls” can buy a certain stock on the expiration day at a discount (below market value) by exercising their options. In this event, the holder of these options has to deliver the stock at the agreed upon price even if this means that he has to buy it himself at a premium or current market price.
The scenario for commodities is slightly different, but the principle is the same.
I hope this helps.
Advanced Document Design for entrepreneurs, intermediaries, and the financial services industry.