Fossil Fuel

TERMS & DEFINITIONS

AST’s: Above ground storage tanks. http://www.epa.gov/oust/cmplastc/asts.htm

At the Market Order: Specifies buying or selling a futures/options contract as quickly as possible, at the best possible price. Gives the broker the discretion to use his/her expertise to execute the contract, regardless of where the market moves, between when the order is given and execution is made.

BARREL OF OIL: 42 U.S. gallons of oil at 60 degrees Fahrenheit.

BASIS: The difference between the price of the actual commodity (e.g. heating oil) and the price of the futures contract. Basis can be calculated by subtracting the futures price from the cash price. For example, if N.Y. Harbor physical heating oil 60cts gal and the futures price is 61cts gal, the basis is -1.00cts gal.

Basis Risk: Price exposure associated with variation in the relationship between a physical or cash price and the appropriate NYMEX reference. These risks may be association with location, product specifications, and time variations.

BXX: Biodiesel blends are designated “BXX” where XX is the volume percent of Biodiesel meeting ASTM D 6751 with conventional petrodiesel. B20, which is 20% Biodiesel and 80% petrodiesel, is a common blend for fleets and buses.

BIOHEAT®: Industry-accepted term for any blend of pure biodiesel with conventional high or low sulfur home heating oil. The heating oil must meet its specification, ASTM D 396 and the Biodiesel must meet its ASTM specification, ASTM D 6751, before blending them together. The heating oil market is focusing on Bioheat® fuel, which is a 2 to 20% blend of biodiesel with heating oil.

BIODIESEL: Biodiesel is a clean burning alternative fuel produced from vegetable oils and animal fats through a chemical reaction and meeting ASTM D 6751. Biodiesel contains no petroleum, but it can be blended at any level with heating oil or petroleum-based diesel.

BULK TERMINAL: A facility used primarily for the storage and/or marketing of petroleum products and which has a total bulk storage capacity of 50,000 bbls or more and/or receives petroleum products by tanker, barge or pipeline.

CALL OPTION: Also referred to simply as a “call.” Refers to an option which gives the buyer the rights, but not the obligation, to buy a futures contract at a specific strike price.

CAP: Risk management program which, usually in exchange for an up front premium, offers a price ceiling for various size purchases of fuel. Caps are most commonly offered from suppliers who utilize petroleum futures options.

COLLAR: Term which refers to a futures or derivatives program where the buyer locks in a price ceiling, but also a price floor. A trucking company which caps its autum price at 60cts gal but only shares in downward moves to 50cts gal has utilized a “collar” program from its suppliers.

CRUDE OIL: Oil in its natural state of composition. “Crude” is classified according to its physical properties: a. Paraffin Based, b. Asphaltic Based, c. Mixed Based.

DAILY CLOSING AVERAGE: An average of all rack suppliers (without those denoted as out-of-product), calculated for either gross or net. Calculated no later than 5:59 p.m. EST daily.

DEGREE DAYS: The number of degrees per day that the daily average temperature is above 65 degrees F. the daily average temperature is the mean of the maximum and minimum temperature for a 24-hour period.

DISTILLATES: Includes No. 1, No. 2 and No. 4 fuel oils, and No. 1, No. 2 and No. 4 diesel fuels. These are light fuel oils for home heating, for diesel engine fuel (including railroad engine fuel and fuel for agricultural machinery), and for electric power generation.

  • No. 1 Diesel Fuel: A light distillate fuel oil that has distillation temperatures of 550 degrees F specifications defined in ASTM Specification D 975. It is used in high speed diesel engines generally operated under frequent speed and load changes, such as those in city buses and similar vehicles.
  • No. 1 Fuel Oil: A light distillate fuel oil that has distillation temperatures of 400 degrees F at the 10-percent recovery point and 550 degrees F at the 90-percent point and meets the specifications defined in ASTM Specification D 396. it is used primarily as fuel for outdoor stoves and portable outdoor heaters.
  • No. 2 Diesel FueL: A fuel oil that has distillation temperatures of 500 degrees F at the 10-percent recovery point and 640 degrees at the 90-percent recovery point and meets the specifications defined in ASTM Specification D 975. It is used in high speed diesel engines generally operated under uniform speed and load conditions, such as those in railroad locomotive, trucks and automobiles.
  • Low Sulfur No. 2 Diesel Fuel: No. 2 diesel fuel that has a sulfur level no higher than 0.05 percent by weight. Used primarily in motor vehicle diesel engines for on-highway use.
  • High Sulfur No. 2 Diesel Fuel: No. 2 diesel lfuel that has a sulfur content above 0.05 percent by weight.
  • No. 2 Fuel Oil (Heating Oil): A distillate fuel oil that has distillation temperatures of 400 degrees F at the 10-percent recovery point and 640 degrees F at the 90-percent recovery point and meets the specifications defined in ASTM Specification D 396. It is used in atomizing type burners for domestic heating or for moderate capacity commercial/industrial burner units.
  • No. 4 Fuel: A distillate fuel oil made by blending distillate fuel oil and residual fuel oil stocks. It conforms with ASTM Specification D 396 and is used extensively in industrial plants and in commercial burner installations that are not equipped with preheating facilities.

ETHANOL: An alcohol which is most often derived from corn. Ethanol is designed to be blended with gasoline to produce a cleaner burning fuel and is an accepted oxygenate component for the oxygenated seasons mandated by the EPA.

FUTURES MARGIN: A deposit required of futures participants that guarantees assurance of performance. Funds are on hand to assure that the buyer or seller makes good on any losses that might accrue on his position. Margin deposits are a sort of futures performance bond.

Historical Volatility: The annualized standard deviation of percent variation in futures prices over a specific period of time. Indicates past volatility in the marketplace.

LIQUIDFIED PETROLEUM GASES (LPG): A group of hydrocarbon-based gases derived from crude oil refining or natural gas fractionation that are often liquefied, through pressurization, for ease of transport. They include: ethane, ethylene, propane, propylene, normal butane, butylenes, isobutene and isobutylene. Uses of these fuels include: home heating, industrial, automotive fuel, petrochemical feedstocks and for drying purposes in farming.

LUST: Leaking Underground Storage Tanks.

NYMEX: The New York Mercantile Exchange, is an exchange where a number of commodities, including WTI crude, heating oil and unleaded gasoline are traded on a future basis.

NORA: (Fee - $.002 per gallon) National Oil Heat Research Alliance. This fee is mandatory and is imposed on all oil heat that is used to heat buildings that are occupied by people or residences.

http://www.nora-oilheat.org/site20/index.mv?screen=home

OPIS RACK PRICES: A daily (Mon.-Sat.), independent, published survey of supplier prices without taxes, freight or superfund for gasoline and diesel fuel at 368 U.S. rack distribution points.

SPOT MARGIN: Additional funds required to be on hand as a contract approaches its delivery date. When a NYMEX contract becomes the “spot” month (the first month on the board), margin requirements are increased automatically by the NYMEX. They increase again some five days prior to the last trading day, with the intent of encouraging players to move out of the delivery month.

TANKWAGON: A truck designed to deliver 3,000 gallons or less of fuel.

TRANSPORT (Tanker Truck): A truck designed to carry liquid in bulk. British term is petrol tanker. Delivers 7,200 to 8,000 gallons of fuel at a time.

UPSTREAM: Term applying to functions or facilities close to the wellhead. Drilling and production are generally upstream processes in the oil patch while refining and marketing are downstream.

UST: any tank, including underground piping connected to the tank, that has at least 10 % of its volume underground and contains petroleum products or hazardous substances.

USTIF: (Fee - $.011 per gallon) Underground Storage Tank Indemnification Fund. Gasoline tank owners with registered UST’s are required to pay the USTIF fees.