The Three Markets: Contract, Spot and Futures

Both oil and gas are traded on three markets: the contract market, the spot market, and the futures market. Each is influenced by different factors and impacts the price of gas at different stages of production. Unlike the futures market, the contract and spot markets are not the kind of markets found on Wall Street; they are informal networks of businesspeople.

The Contract Market
Though it seems like oil companies spend most of their time ruining your day by raising the price of gas, their primary business is exploration. Once an oil company finds a field and coaxes it into producing crude, it takes that unrefined oil and sells to refiners. The vast majority of oil is sold by contracts. A veritable orgy of contracts signed between oil companies and dealers, oil companies and refiners, refiners and independent dealers predetermine the fate of most oil and gas.

Refiners plan their purchasing and refining activity to ensure that these contracts are fulfilled. In exchanged for this privileged standing, refiners charge contract customers a premium.

The Spot Market

Need some extra oil? Got a spare barrel you need to sell today? The spot market is for you. The spot market fills the gap left by the contracts market. When a refiner needs extra oil to meet its contracts, they find people with surplus oil on the spot market. Unlike the contract and futures markets, which trade pieces of paper, the spot market involves the trade of actual barrels.

The best deals are often found on the spot market. Since neither the buyer or seller is locked into a prearranged deal, the laws of supply, demand, and free market are mostly in effect.

The Futures Market
Crude oil is the bees knees of the American Mercantile Exchange. A futures contract might stand for 1,000 barrels of West Texas Intermediate to be delivered at Cushing, Oklahoma. The futures market represents that collective state of the oil market at any particular moment. When you hear reporters talk about the price of oil reaching $100 per barrel, they’re talking about the futures market. Because fluctuations on the futures market are driven by information, its prices guide the contract and spot markets.

The people buying and selling futures rarely, if ever, collect on their contracts; a seven year period saw 5 billion barrels traded, of which only 31,000 were ever delivered.

Refineries

Refineries are the temples where crude oil gets Bar Mitzvah’d into gas. Shifts in the refining world over the past two decades have helped ratchet up the price of gas. In the early 80′s, there were over 350 refineries, mostly owned by the oil companies. The oil companies didn’t see refining as a place to generate profit, but as an integral part of a larger operation.

If a refiner’s rack price is consistently too high, dealers will take their business elsewhere when their contracts expire. If the rack price is too low, buyers might swamp the refiner, leaving it unable to meet its contractual obligations.

To ensure pricing continuity, refiners used to call each other and share pricing information. Activist judges on the Supreme Court called this “collusion.” The refiners, unfazed by the justices, came up with a crafty alternative: publicly posting their rack prices. Somehow, the Ninth Circuit Court found this to be illegal, too. Nobody knows how refiners discuss their pricing arrangements nowadays, but we wouldn’t be surprised if it involved a members-only group on Facebook.

Despite multiple warnings, the American political system is so dysfunctional that very little has changed since a president named Jimmy Carter tried to get us to get serious about reducing our dependence on gasoline. Oh, cars and trucks get better gas mileage than they did back then. But the nation still lacks a coherent policy for radically reducing consumption.

The frustration over prices at the pump is likely a major contributor to Obama’s sagging approval ratings.

Earlier this month, Gallup’s daily tracking poll showed that the president’s favorability rating had slipped to 41 percent, tied with his lowest ever. Voters tend to blame the person in the Oval Office when gas prices soar.

I understand the frustration. Families struggling in the post-recession economic landscape — some still jobless, many earning less than they used to — are hard-pressed to fork over more and more money at the gas pump.

And for many of those families, driving has become a necessity. They’re not taking leisurely spring-break road trips. They’re trying to get to work, to the doctor’s office, to the grocery store.

Over the last 30 years, suburban and exurban development, especially in fast-growing Sunbelt cities, have produced sprawling mega-lopolises, wherein workers may live an hour’s drive (or more) from the workplace. Those suburbs aren’t exclusive enclaves of the affluent, either. Many suburbs are economically and racially diverse, so more families of modest means live far from work. A dime a gallon can break the budget.
]]> http://my-complaint.com/gas-prices-never-down/feed/ 1 http://my-complaint.com/how-to-complain/ http://my-complaint.com/how-to-complain/#comments Thu, 25 Aug 2011 00:43:34 +0000 admin http://my-complaint.com/?p=15758 Continue reading →]]> Consumers are often faced with several challenges when they wish to complain about a product or service. A good resource to help you complain effectively is the Complaint Courier, which is featured at www.ComplaintCourier.ca. This powerful online tool provides instant access to the resources and expert advice you will need to navigate your way through the complaint process from start to finish, and explains how to make any type of complaint in a clear, organized and effective way. The following guidelines will also help you to complain more effectively.

First Things First

•Give the merchant the first chance to solve the problem. Contact the salesperson, retailer or business when you have a complaint about any goods or services you bought. When there is a complaints department, use it. When there isn’t, talk to someone in authority, such as a manager. A face-to-face discussion is best. Be firm and businesslike, but polite. Calmly and accurately describe the problem and what you want the company to do to resolve it.

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If the problem is not resolved that way, ask for the telephone number of the company headquarters and contact the customer service department. Request specifics about how and when something will be done, and get the company representative’s name in case you have to refer to the conversation later. Write down any details of your complaint and keep them in a file. Make sure to date your notes.

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If your call doesn’t produce satisfactory results, write a letter to someone higher up, such as the general manager or owner (see sample letter). Provide all the details of the problem and explain your efforts to resolve it. Ask for action. In the case of products, send a copy of your letter to the manufacturer, and be sure to keep a copy of it yourself.

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If none of these steps work to your satisfaction, consult the key consumer contacts of this Handbook for government offices and consumer organizations that apply to your situation. If you don’t know where to start, call the federal-provincial-territorial government consumer affairs office where you live. Someone there will direct you to the right organization. Or, use the Complaint Courier to file your complaint online.

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Taking legal action should be your last choice. If you decide to sue, remember that there are often time limitations on filing lawsuits. You may wish to check with a lawyer about the legal process and any limitations that may apply to your case in your province or territory.

Strategies for Success

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Do not be afraid to complain. Good businesses will be pleased to correct any mistake on their part. They know that customer goodwill is the best form of advertising.

•Always keep a file of important information related to your purchase, include the sales receipts, repair orders, warranties, cancelled cheques, contracts and any letters you have written to or received from the company concerned.
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Do not procrastinate. When a product is defective or unsatisfactory, it is important that you return it quickly so that you do not lose the right to get your money back or to collect damages in some cases. Always check the return policy before you buy.

What to Do When You Have Complained Without Any Results?

If you feel you have given the company enough time and that your problem has not been resolved, send a copy of your complaint letter and copies of supporting documents (not originals) to, or file a consumer complaint with, your provincial or territorial consumer affairs office or Better Business Bureau. If you use the Complaint Courier it will give you the option to automatically forward your complaint to the appropriate government office.

Small Claims Court

Small claims court can be an informal and relatively inexpensive way to resolve disputes when the amount involved is less than $3,000 or, in some provinces, up to $25,000. However, you will have to pay a fee to file a claim. Once the suit is launched, you may have costs for such things as serving orders, payments to witnesses and travel expenses.

You do not need a lawyer to go to small claims court, although in most provinces and territories the help of a lawyer is allowed. The court staff is experienced in helping consumers prepare the necessary forms, and the judges have the power to settle disputes. This court allows each side to explain its story and does not expect consumers to know legal technicalities.

For information on how to proceed, contact the small claims or provincial or territorial court nearest you (look in the government listings in your phone book). The websites of these courts also often list the procedures to follow and have copies of the forms you will need to complete.

As has been evidenced by actions in the past, e.g. the Vietnam War and now the Iraq war, America tends to go leaps and bounds beyond what may be immediately necessary. Even though this is generally done with good intentions, it can be seen in the state of Iraq today that adequate planning doesn’t really happen when it needs to. Lack of planning, understanding, and overall apathy towards a situation is also evident in the state of the U.S.’ environmental policy and the opinion on this issue of the general public.

Many American citizens neither really have an idea of how to fix the world’s environmental issues, nor do they understand the gravity of the situation. Of course almost everyone knows that global warming is an issue (for which the credit goes to Al Gore), but not everyone is willing to make a change to solve it. This fact can be seen in the general American consensus on nuclear power as a solution to CO2 emissions, even in the short term. Many simply do not see it as a viable option because of accidents in the past. So many cite Chernoybl and Three Mile Island as their reasons for not supporting nuclear power, although almost no one seems to know that Chernobyl occured because of a flaw in the basic design of the reactor (a design that is no longer in use anywhere outside of Lithuania), and that only one person is thought to have died from the Three Mile Island incident, without conclusive evidence to support that the accident was the cause of death. This overeagerness to help change things and the lack of knowledge or unwillingness to accept alternatives when affecting a change is a failure common to both much of the American public and the American government.

Many see China as the logical successor to America as a global superpower. In terms of effects on the environment, China has already surpassed the U.S. in its CO2 production, even though peak energy production has likely not yet been reached. However, pressure on China to clean up its act, so to speak, is ever-increasing as China becomes the new center of attention. China realizes this, and so, many nuclear power plants are already in construction, as well as other alternative energy sources. In terms of foreign relations, China is being a bit careless, but at least it hasn’t so far invaded another country without any solid grounds to do so.

In short, I believe that whether it is left to the Western world to lead the rest of the world is a potential change that the West must allow to happen if it does. The way in which this possible evolution is handled will likely be a reflection upon whether the West will allow the world to continue to advance, or whether it is too stubborn to relinquish its control, and is willing to bring the whole world down with it in order to maintain that control.

The fuel rods in at least three reactors are partly molten. All six reactors are in trouble, although most were not on-line during the earthquake! In spite of all downplaying by officials, the nuclear industry, and science apologists, a complete meltdown of some reactors and a nuclear chain reaction of molten fuel are still possible.
The Fukushima plant is 40 years old and was supposed to be dismantled, but is kept alive just like many frail reactors all over the world. Already during an earthquake in 2008 did water leak out of a fuel rod storage facility at the Fukushima plant.

Friday, March 11, 2011

An earthquake with a subsequently to be expected tsunami wave triggered the far reaching problems in the Fukushima Dai-Ichi nuclear plant. It needs to be stressed: This was the trigger, not the reason for why the mostly off-line reactors are in trouble. As we will discuss, the reason is the same as it was in Chernobyl in 1986, the same as for the 1979 Three Mile Island incident before that: nuclear power is inherently unsafe and too complicated to be safely handled by humans under the pressures of human society, which includes economical and political pressures.

Merely three of the reactors in Fukushima were running at the time. The widely praised automatic emergency shut-off did therefore little to prevent the catastrophe. A boiling water reactor needs active cooling even when “switched off” – that means, you cannot actually switch it off! It keeps going at a steady rate of at least 3% normal for over 30 years. Remember, we are talking 3% of the power output of a nuclear reactor, which is huge and the reason for why such reactors have been build in the first place.

After the diesel generators failed to keep the cooling water pumps running, batteries only lasted one hour. The water necessary to cool the fuel rods started to boil away. External diesel generators were brought to the plant, but could not be connected because the batteries’ sockets were under the waterline that one would expect in the basement suffering flooding. None of this involves nuclear physics. These are failures that humans always encounter with long and well known technologies. No future advance in nuclear technology is expected to improve the usual error rate when humans meet conventional technology.

Chernobyl is often conveniently blamed on “the stupid Ukrainians messing up”. Keep in mind: The present failures occurred in the technologically most advanced human society, which arguably is Japan!
The Japanese survivors of the 1945 atomic bombings of Hiroshima and Nagasaki lived the rest of their lives with the stigma of having been exposed to radiation, a stain that years never erased. Known as Hibakushas, they are formally recognized by the government if they lived within proximity of the blasts, and receive a special medical allowance.

But the designation also led to them being ostracized by other Japanese, who feared wrongly that the contamination was contagious or could be hereditary. The result was that many survivors of the bombings, and even their children, lived ghettoized lives because of their exposure to radiation.

The prospect of a similar stigma now worries some of those in and around the Fukushima plant.

the question is how much time we need to think about the human life?

Seventeen companies are named in the lawsuit, including Seacor Marine and Diamond Offshore Drilling. According to a Business Week report, the suit seeks compensatory and punitive damages on behalf of all commercial fisherman, charter-boat operators and other businesses affected by the spill; property owners whose land was fouled; and oil workers who lost work because of the U.S.-imposed halt in offshore drilling.

According to Business Week, the complaint further alleges that the fireboats should have used their “dynamic positioning systems” to hold the Deepwater Horizon in place while fighting the fire with industry-approved methods, which would have prevented the sinking and the oil spill.

The lawsuit has been filed in U.S. District Court, Eastern District of Louisiana (New Orleans).

In other oil spill news, federal officials have decided to allow pressure testing of the containment cap that was installed over the leaking well last week to continue for now. This despite the appearance of bubbles and seepage in four place around the gusher. According to The Washington Post, the Obama Administration is allowing BP to keep the cap shut off for the next 24 hours while engineers try to determine the severity and consequences of the problems.

The well was shut off last week, and oil has stopped flowing in the Gulf of Mexico for now. However, over the weekend, BP and the government were at odds over whether to allow the well to remain shut off. BP wants it to stay capped until relief wells – the only permanent way to end the spill – are finished sometime in the next month.

However, the government was pushing BP to open the well up and continue efforts to siphon the oil and collect it in containment ships on the shore. It would take at least a few days to get those ships reconnected, and oil would have to be allowed to flow freely into the sea while that occurred. Federal officials took this stance after pressure readings on the cap weren’t as high as expected. This could be an indication that there is a leak somewhere else in the wellbore, or deep down in bedrock, which could make the seabed unstable. The well would need to be reopened to ensure no further damage is done
]]> http://my-complaint.com/latest-bp-oil-spill-lawsuit/feed/ 0 http://my-complaint.com/oil-disaster/ http://my-complaint.com/oil-disaster/#comments Thu, 03 Jun 2010 19:50:54 +0000 admin http://my-complaint.com/?p=15656 Continue reading →]]> As many hundreds of thousands of gallons of deadly oil continues to spread throughout the Gulf of Mexico, lapping at the Louisiana coast, en route to the Atlantic Ocean, the folly and arrogance of Barack Obama’s March, 2010, proposal to expand offshore drilling is hideously highlighted. Once again it is the everyday people of this nation and planet who are paying the price for Obama’s complicity with the avaricious oil companies and their corporate allies. This has nothing whatever to do with national or planetary security, and everything to do with corporate profit and greed.

While the corporate media attempts to minimize, under-report, distort, or outright ignore the enormous and growing and irreparable damage to people, wildlife, fishing, vegetation, and the eco-system of Mother Earth caused by this corporate horror that began on April 20th, 2010, in the Gulf of Mexico, the Obama / Biden / Rahm Emanuel administration was busily urging that off-shore drilling be expanded. In an April 15th, 2010, article in The Black Commentator titled, ‘Decloaking the Deadly Foxes in Our Midst,’ I specifically warned about the insidious and “environmentally insane off-shore drilling” policies on the part of “Obama and his Democratic and Republican Party colleagues.” Who was paying attention? Who is paying attention even now?

It is important to understand that British Petroleum (BP) is not by any means the only corporate player involved in this horrendous national and planetary disaster, just as Goldman Sachs is not, by any stretch of the imagination, the only corporate vampire on Wall Street. In point of fact, Haliburton Corporation, Transocean Corporation, and Hyundai Heavy Industries all worked together with British Petroleum. The bottom line for these corporations is profit for the elite, motivated by greed. The safety and welfare of everyday people and the planet is a distant second or third – if indeed at all.

Even as the pro-apartheid Zionist Obama / Biden / Rahm Emanuel clique continues to wage bloody imperialistic wars in Afghanistan, Iraq, and Pakistan (to name but a few places), joblessness, foreclosures, college / university education-tuition hikes, homelessness, racism, corporate government attacks on labor unions & working people, and prison incarceration rates continue to sky rocket in this nation. Even as public education is in fact dismantled and privatized by the Democratic Party foxes and Republican Party wolves, our young people serve as cannon fodder for the corporate / military elite – going from the cradle to the military or to prison.

Our addiction to oil comes at a very high price. We have to wean ourselves off of it and as quickly as possible. Our ability to destroy and pollute this planet seems mind bogling and insane. We knew long ago this was coming but took no steps towards change. It amazes me that as a species we can be so kind on one hand but continue to destroy the planet at a reckless pace on ther other. I fear a true desire and push for real change will only come when millions of people are sickened and die. By then I wonder if it may be too late. Facts are facts people. We best wake up soon.

But isn’t the Obama Administration doing everything possible to help US homeowners now living in a toxic home because of toxic Chinese drywall? The Chinese Drywall Complaint Center says, “the BP Deepwater Horizon oil spill-now officially the worst oil spill in US history is not the Obama Administrations first astonishing failure to respond to a national disaster. The Obama Administration’s response to toxic Chinese drywall has been negligent, and they act like they either do not want to talk about it-or their are afraid of offending the Chinese-either way 100,000′s of US Homeowners in the US Southeast have been abandoned by Washington, DC.” The group says,”even worse than Obama’s lack of interest in toxic Chinese drywall-the US Consumer Products Safety Commission has miserably failed 100,000′s of US homeowners with their lack of information.

Symptoms of toxic Chinese drywall in homes in Louisiana, North Florida, Central Florida, South Florida, South Carolina, Florida, North Carolina, Georgia, Alabama, Mississippi, Virginia, or Southeast Texas include: repeated air conditioning coil failures, within two years of the home being built. In addition to air conditioning coil failures, toxic Chinese drywall in the US Southeast may cause appliance failures, light bulbs burning out prematurely, copper turning black, combined with all, or some of the family are experiencing seemingly never ending upper respiratory issues, nose bleeds, severe headaches, unexplained very unusual rashes, especially in the late spring, or summer. The time frame for toxic Chinese drywall in the US Southeast is 2001-to early 2009. The Chinese Drywall Complaint Center is saying, “We think the worst effects of toxic Chinese drywall in the US Southeast occur in from mid April—mid October because of high heat combined with high thresholds of humidity.”

First filed last Friday in the U.S. District Court in Tallahassee on April 30, the amended complaint in Ward, et. al. v. BP, et.al. (N.D. Fla., Case No. 4:10-cv-00157-SPM-WCS), alleges gross negligence, willful misconduct and other claims in the design, construction and operation of the rig, as well as in the response to the disaster. The case has been assigned to Chief Judge Stephan P. Mickle.

The defendants include various divisions of oil giant BP (formerly British Petroleum), Transocean, Ltd. (the owners/operators of the Deepwater Horizon), Halliburton Energy (which was involved in “cementing” operations to cap the oil rig when the explosion occurred) and Cameron International Corporation (manufacturers of the rig’s blow-out-preventers, which failed to operate properly and prevent the oil spill).

Similar lawsuits are planned for Texas, Alabama and Mississippi, as the devastation from the oil rig disaster continues to grow.

“Oil continues to flow into the gulf, and with it an environmental nightmare,” said Dr. Howard, who most recently played a leading role in coordinating a national team of more than 40 law firms in the Toyota sudden acceleration lawsuits.

“This unmitigated horror threatens to destroy one of the most beautiful marine, coastal and estuarine environments in the world.”

clean up the oil spill along the Gulf of Mexico. The company said they are recovering over 2000 barrels of oil everyday and are in the process of cleaning up the oil spill.

“It is expected that it will take some time to increase the flow through the system and maximise the proportion of oil and gas flowing through the broken riser that will be captured and transported to the drillship” BP said.

The company said this past week that they have been recovering the oil which spread into coastal regions which is an estimated 5000 barrels and over 1000 have been recovered already. BP has been working on covering the leaks in the leaks and has been taking measure to ensure the incident does to worsen and repeat itself.

BP is offering compensation for those affected by the spill in Florida, Louisiana, Alabama and Mississippi and has spend $650 million on total expenses out of which $450 million was spent on the clean up. BP said 15,600 complaints were received in total out of which 2,700 have been compensated.

The submission to NAFTA’s commission for environmental co-operation comes the same day Environment Minister Jim Prentice said Canada’s greenhouse gas emissions have hit a high and are on the way down.

“You’re going to see Canadian emissions have peaked and the gradual reduction of our emissions over time as we move forward,” Prentice told reporters Wednesday. “I’m quite confident in saying that is what you’re going to see.”

Prentice said Canada’s greenhouse gas emissions dropped 2% between 2007 and 2008.

That news didn’t stop the advocacy group Environmental Defence Canada from accusing the government of doing little to battle climate change, and additionally, of allowing contamination from the Alberta oilsands to spoil fish habitats.

The government “is failing to do anything, really, to clean up the tarsands,” said Matt Price, director of policy for Environmental Defence. Instead, he said, it “is running interference for the tarsands industry.”

Environmental Defence joins the U.S.-based Natural Resources Defence Council and three private Canadian citizens in submitting the complaint to the commission, a side-body of NAFTA.

The submission focuses on what Price called a failure to enforce the federal fisheries act, which he said prohibits adding pollutants or contaminants to fish-bearing bodies of waters or waters that flow into them.

Tailings ponds are created when industry extracts bitumen from the oilsands, using hot water to separate it from other compounds. The contaminated liquid is then held in large ponds.

In their submission to the commission, the environment groups charge the tailings ponds leach contaminants into both surface and groundwater in the Athabasca watershed.

The bovine brew is in the final stages of development by the Cow Protection Department of the Rashtriya Swayamsevak Sangh (RSS), India’s biggest and oldest Hindu nationalist group, according to the man who makes it.

Om Prakash, the head of the department, said the drink – called “gau jal”, or “cow water” – in Sanskrit was undergoing laboratory tests and would be launched “very soon, maybe by the end of this year”.

“Don’t worry, it won’t smell like urine and will be tasty too,” he told The Times from his headquarters in Hardwar, one of four holy cities on the River Ganges. “Its USP will be that it’s going to be very healthy. It won’t be like carbonated drinks and would be devoid of any toxins.”

Hindus revere cows and slaughtering them is illegal in most of India. Cow dung is traditionally used as a fuel and disinfectant in villages, while cow urine and dung are often consumed in rituals to “purify” those on the bottom rungs of the Hindu caste system.

In 2001, the RSS and its offshoots – which include the opposition Bharatiya Janata Party – began promoting cow urine as a cure for ailments ranging from liver disease to obesity and even cancer.

Mr Prakash said his drink, by contrast, was made mainly of cow urine, mixed with a few medicinal and ayurvedic herbs. He said it would be “cheap”, but declined to give further details about its price or ingredients until it was officially launched.

He insisted, however, that it would be able to compete with the American cola brands, even with their enormous advertising budgets. “We’re going to give them good competition as our drink is good for mankind,” he said. “We may also think of exporting it.”