A popular idea in my town now. Some folk seem to feel as if not going into a BP station, just don’t buy that BP gas, might work in some way to express something. The thing is, all gas is the same.
Oil to the refinery comes in at todays “spot price”. In the Gulf Futures Exchange
, a building in New Orleans, LA. , where there is 2 special rooms. “Future contracts”, and “delivered today or your money”, more commonly know as the “spot price room.”
In the “futures room”, there is a low narrow desk that separates buyers from sellers. They negotiate a legal promise to deliver on one side, and receive on the other, a lot of crude oil. There are very bad financial $ penalties for failure to deliver the amount of oil, at agreed $ /barrel, on time, at a date in the future, specified in contract . It’s also very bad if your refinery can’t receive it. This is why the “future room” exists. If my refinery must buy
500,000 barrels next week, but we don’t want it, then I would want to sell the “legal commitment to pay x$/barrel for delivery”, a binding contract to accept delivery on that day at X$ barrel, I will want to sell it. Maybe the refinery down the bay needs oil, maybe they don’t. But I must sell and the “futures contract of delivery of oil at x/$ buyers”,across the other side of the desk , on the buyers side of the room, will bid on it. I might have to pay them to take it. How do you sell an obligation to buy 100 million barrels at a 150 $ /barrel when the spot price is 100 $ /barrel? Simple, have my agent in the future exchange room offer to pay the other agent 152 million $ to buy the “future contract” . They will take it or leave it. Maybe we must bid more. Futures trading is all about swapping at an agreed price. No lawyers needed, only deeply bonded fat cat’s agents allowed in the rooms.
But only for so long, deals must be made, the spot price , as well as the futures price, is gone over daily. In those 2 rooms. The contracts are legally binding and the prices reported daily publicly.
The day a 200 Million $ load of an oil tanker is delivered is defined as, it hits the dock, off loads the product, serious job to get the time right. Off loaded? then $ goes into the account of the “spot price contract holder” Cash on the barrel as soon as 200 million $ of product has been sold.
Things change at sea, and the value of the oil in a huge tanker of oil as it sails to somewhere is usually the most important economic variable. Thus the existence of the “spot market room”.
The “spot market room”, is in a different room, but is in the same building as the “futures trading in the oil gulf”, room. It also has the same dividing desk, sellers on one side, buyers on the other . At this point the refinery is committed to accept the tanker. The tanker is close, yet “spot oil buyers” still bid on the oil in the tankers, in the spot room. In the “spot room”, it’s really all about agents bidding against each other to fulfill their contractual obligations. The refinery owner, and the tanker owner are rolling like fine oiled machines. Huge investment in infrastructure paying off . Not a system designed by hill billys or movie stars. Oil business that is.
The buy guys in the “spot room”, are already told what to bid, sorta. At some point, someone at the seller side must commit to a spot sale. Then you, as an agent, have done your job. The oil tanker hits the dock, and off loads. As soon as it’s done offing it’s legal obligation of oil, "cash on the barrel, maybe 200 million $ ", will be paid to some other Co., usually , only rarely to the owner of the “futures contract to delver oil”. Most likely to the “spot contract holder”.
“Oil future contracts”, are made only between big players in the oil biz, and only in a certain a area. There is a different building , set up much the same, in the other oil theaters of oil production, to swap futures contracts in other areas of the world. There is another one in New York, but you can’t trade futures between the New Orleans building and the New York one. Each has it’s own territory, no overlap.
Oh, and in case you have read this far and remember my header… You can’t Boycott BP because all the oil is the same. The refineries buy crude from anyone who has it at the best price they can get, using a hedged crystal ball, the “futures system”.
BP is, and will continue to be a major source of crude to USA refineries. When the oil, from Mobil, or Exxon,BP, any name with oil, is paid for. All the refined gasoline then runs in pipelines , to local truck stations all fed, all the companies, from one big line, running into that region. Diesel, gasoline, of all brands, comes up to northern states distribution centers in the same pipe from the same refineries.
At this point 98% of the profits BP was due has been paid to BP.
The retail sales of gasoline and snacks is very different from BP’s core money maker (production). Most of the stations with a BP sign are locally owned. The gas that they sell came up the same pipe Exxon and Mobile used. All the gas comes up a consortium transport pipe from the refineries to a local Tanker truck depot. Then a tanker truck moves it the last few miles to your gas station. Then it is advertised as Exxon, Mobil , BP, but it is the same gas.
It is all the same stuff. The “high test” stuff, is added right at the tanker semi. Before that, it’s all the same gas, coming up the same pipe. The difference in octane and brands is added at the semi truck moving the gas locally.
BP is a source of crude supplier. To boycott them, you must stop buying petroleum products. All the oil is sold on a common exchange. They didn’t make 6 billion $ last quarter selling donuts and beer.
