Crude Oil Futures Prices Quotes

In the futures markets, they bought and sold paper contracts. Futures contracts had been around for more than a century and were an integral part of the food system. Corn, pork, and soybean futures were traded on the Chicago Board of Trade. The NYMEX specialized in eggs and butter. The futures market wasn’t big—traders in the market tended to be farmers and big grain millers. They used futures contracts to limit their risk. The owners of the NYMEX weren’t content with their sleepy corner of the financial world, and they decided to expand their business and sell contracts for new kinds of products. The NYMEX introduced the first futures contract for crude oil in 1983. At first, the birth of oil futures contracts looked like a threat to Koch’s business model. Howell and his team spent years figuring out how to be the smartest blind men in the dark cave of the physical oil business and making the best guess as to the real price of oil. Koch Industries had gained an expertise in exploiting the opacity of oil markets and wringing the best price out of its counterparties. The new oil futures contract created something that was anathema to this business model: transparency. When the NYMEX debuted its oil futures contract, it created a very visible price for crude oil that changed by the minute on a public exchange. Again, this wasn’t the price of real crude; it was the price for a futures contract on crude, reflecting the best guess of all market participants as to what a barrel of oil would be worth in the future. Even though the futures price wasn’t the real price, it provided everybody with a common reference point. Now, when Koch called up someone to buy oil from Koch’s tank farm in St. James, that customer could look at a screen and start haggling based on what the markets in New York were saying the price of oil was worth. “It was the first time that there was a common, visible market signal,” Howell said. “It just kind of sucked the oxygen out of the room for that physical trading.

It’s difficult for outsiders to even understand the nature of a contango market. In essence, the price of oil in spot markets, which reflect the price of oil today, tends to be lower than the price of oil to be delivered in the future. This is attributable to a host of complex reasons.I In the relatively rare scenario when oil today is cheaper than oil in the future, the markets are said to be in contango, and it doesn’t tend to last very long. Usually the market reverts to its normal state of cheaper oil in the future. When the market goes into contango, it presents a whole host of ways for Koch’s traders to profit. In late 2008, the potential profits were extraordinary. The size of the contango became enormous—the gap between oil sold today and oil sold for delivery a few months out became roughly $8 a barrel. A more common level of contango would be in the range of $2 or $4 a barrel. And the gap wasn’t just wide, it was long-lasting. The markets remained in contango for several months. Koch Industries, and a handful of other giant oil producers, were able to exploit this gap in a special way. Because Koch Industries traded in both the futures markets and the physical markets, it could execute something called the “contango storage play.” One former senior trader within Koch Supply & Trading called the contango storage play a “bread-and-butter” strategy for Koch’s crude oil department. The mechanics of the contango storage play seem deceptively simple. A trader at Koch Industries buys oil in the spot markets, where it is cheap. Then, the trader sells oil for delivery in the futures markets, where oil is more expensive. When the contango gap is $8, it is easy to picture how quickly the profits pile up. The trader can buy oil for $35 and sell it for $43, almost instantly. There is a catch, however. To execute the contango storage play, the trader must be able to do something that most traders can’t do—they must be able to deliver the actual, physical oil in that future month. If a typical oil speculator—who did not own an oil refinery, storage tanks, or an oil tanker ship—tried to execute the contango storage trade, they could find themselves shut out. Executing the contango storage trade didn’t just require deep knowledge of arcane shipping markets and transportation law; it also required deep relationships in the private world of oil production.

The new GST: A halfway house In spite of all the favourable features of the GST, it introduces the anomaly of having an origin-based tax on interstate trade he proposed GST would be a single levy. 1141 words From a roadblock during the UPA regime, the incessant efforts of the BJP government have finally paved way for the introduction of the goods and services tax (GST). This would, no doubt, be a major reform in the existing indirect tax system of the country. With a view to introducing the GST, Union finance minister Arun Jaitley has introduced the Constitution (122nd Amendment) Bill 2014 in Parliament. The new tax would be implemented from April 1, 2016. Both the government and the taxpayers will have enough time to understand the implications of the new tax and its administrative nuances. Unlike the 119th Amendment Bill, which lapsed with the dissolution of the previous Lok Sabha, the new Bill will hopefully see the light of the day as it takes into account the objections of the state governments regarding buoyancy of the tax and the autonomy of the states. It proposes setting up of the GST Council, which will be a joint forum of the Centre and the states. This council would function under the chairmanship of the Union finance minister with all the state finance ministers as its members. It will make recommendations to the Union and the states on the taxes, cesses and surcharges levied by the Union, the states and the local bodies, which may be subsumed in the GST; the rates including floor rates with bands of goods and services tax; any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster etc. However, all the recommendations will have to be supported by not less than three-fourth of the weighted votes—the Centre having one-third votes and the states having two-third votes. Thus, no change can be implemented without the consent of both the Centre and the states. The proposed GST would be a single levy. It would aim at creating an integrated national market for goods and services by replacing the plethora of indirect taxes levied by the Centre and the states. While central taxes to be subsumed include central excise duty (CenVAT), additional excise duties, service tax, additional customs duty (CVD) and special additional duty of customs (SAD), the state taxes that fall in this category include VAT/sales tax, entertainment tax, octroi, entry tax, purchase tax and luxury tax. Therefore, all taxes on goods and services, except alcoholic liquor for human consumption, will be brought under the purview of the GST. Irrespective of whether we currently levy GST on these items or not, it is important to bring these items under the Constitution Amendment Bill because the exclusion of these items from the GST does not provide any flexibility to levy GST on these items in the future. Any change in the future would then require another Constitutional Amendment. From a futuristic approach, it is prudent not to confine the scope of the tax under the bindings of the Constitution. The Constitution should demarcate the broad areas of taxing powers as has been the case with sales tax and Union excise duty in the past. Currently, the rationale of exclusion of these commodities from the purview of the GST is solely based on revenue considerations. No other considerations of tax policy or tax administration have gone into excluding petroleum products from the purview of the GST. However, the long-term perspective of a rational tax policy for the GST shows that, at present, these taxes constitute more than half of the retail prices of motor fuel. In a scenario where motor fuel prices are deregulated, the taxation policy would have to be flexible and linked to the global crude oil prices to ensure that prices are held stable and less pressure exerted on the economy during the increasing price trends. The trend of taxation of motor fuel all over the world suggests that these items