“Free Market” is an Oxymoron Pt. 2: Evil Exists

If you’ve been following the past few posts about how energy markets work, you’re probably asking the following Deep Question: So what? If it’s true that markets are a complex information-gathering system, and that information is key to accurate price discovery for energy… what does that mean for you, Average Energy Consumer? One thing this […]

Discuss: Energy and moral capabilities

I have questions for you! Please weigh in. In 1865, W.S. Jevons wrote about the eventual depletion of coal in England. Here’s the quote: “This question concerning the duration of our present cheap supplies of coal cannot but excite deep interest and anxiety wherever or whenever it is mentioned. For a little reflection will show […]

Mailbag: Live Nude Credit Default Swaps

The ever-astute Kelli B. has posed a question regarding the series on commodities trading, which I shall attempt to answer! “Revelation for the day: credit default swaps are private contracts between two firms. O_O That explains so much about why attempts to mitigate the public collateral damage when volatility blows sky-high are usually impotent from the get-go: […]

Part 3: The Crack Spread (yes, really)

In Parts 1 and 2, we learned about commodities and derivative markets. Today, we’ll talk about a different kind of natural gas trading, and, as promised, we’ll talk about the crack spread and why you love it. Hedging Further: OTC trading and commodity swaps Another type of risk-hedging is achieved through OTC (over-the-counter) trading. These are trades […]

Part 2: Risk-Hedging: Futures and derivatives

In Part 1, we learned about what affects spot prices for natural gas, and discovered the need to hedge against future risk in natural gas markets. How does one do that? One should probably not hide one’s cash in one’s mattress–it’s not doing you any good there! Hedging one’s Bets: Natural Gas is a Lot Like […]