Why would the price of oil on the spot market be 40% than the cost of production?

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It means that we have an energy policy so that our economy is not subject to the whims of the spot oil market.

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The scramble to secure oil supplies now and into the future has contributed to the sharp increase in the price of oil on both the spot market and for future delivery.

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The spot market is where oil companies buy (relatively) small volumes of oil for short term delivery.

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Rich and Green, who essentially invented spot-market trading in oil, aroused the scrutiny of the U.S. Justice Department for their shady Middle Eastern trades in the 1970s.

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China will import cheap U.S. gas into Asia, basing prices on spot market fundamentals rather than expensive oil indexed gas contracts.

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Now I do not believe that ExxonMobil buys a very large portion of their supply from the spot market and that the vast majority of their oil comes from their own fields or long term contracts.

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Oil pumped in the Gulf of Guinea comes ashore, via the international spot market, in the form of billion-dollar transfers that have made Lagos a regional financial centre.

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What about the contango effect (when the price of a barrel of oil for delivery in six months is higher than an identical barrel bought on the spot market today)?

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The most obvious is quality control: the market is infested with snake-oil salesmen, and they are harder to spot from half a world away.

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