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Monday, November 8, 2010

BP's sinking role in setting WTI crude oil prices

By: Bob van der Valk
Dateline: Terry, Montana
November 7, 2010

In July 2010 BP Plc sold its Cushing, Oklahoma oil tanks, which they used as a major tool in controlling the price of West Texas Intermediate crude oil, to raise funds to pay for the Macondo well fire and oil spill disaster in the Gulf of Mexico.

They did lease back 7.8 million barrels of tank storage space at Cushing from the buyer Magellan Midstream Partners LP, which acquired the tanks as part of a larger $339 million transaction, including some of BP's existing oil inventories.

Cushing is the delivery point for the West Texas Intermediate (WTI) crude oil futures contract, the benchmark oil price in the Americas, and storage levels in the tanks have a major influence over the price of oil and fuel.

BP has been force as an oil trader and in the past has leveraged its space at Cushing for in having a trading advantage. They are still the only major oil company in the top three storage space holders with WTI crude oil inventories. The top two are pipeline companies leasing out space to commodities trading firms, in effect putting Wall Street bankers in control of the WTI crude oil price.

The imminent completion of the Keystone XL pipeline by TransCanada is going to increase Canadian crude oil exports and will end this landlocked crude oil storage facility from being a major factor in determining the world price for crude oil.

Instead, companies with access to the huge tank facilities at Cushing will be making their profits the old fashioned way by storing crude and committing it for sale later. The old fashioned “Buy low – sell high” principle will be back in full force.

The Cushing tank farm hold 36 million barrels of crude, which is just enough to supply U.S. oil demand for nearly two full days The 57 tanks BP sold have a capacity of 7.8 million barrels but operational constraints currently restrict usable capacity to 5.5 million barrels or 15% or the total capacity of the Cushing tank farm.

An additional 2 million barrels of storage is in the planning stages of being built anticipating the pipeline start up bringing in more Canadian oil imports in early 2013.

In June 2009 Attorney General Drew Edmondson sued BP for engaging in the unfair and deceptive practice of manipulating, and of attempting to manipulate, gasoline and crude oil prices in connection with the trading of energy futures on commodity trading markets.

He alleged that the manipulation took place from 2002 until present, through BP's "acquiring and hoarding short-term supplies of gasoline and crude oil".

Drew Edmondson retired this year after losing a run for the Oklahoma governorship in this year’s primaries. And BP may not recover financially enough from the expense of covering the damages and fines related to the Gulf oil spill for them to continue to be a market maker for crude oil pricing. What a difference a year makes in the crude oil trading business.

Friday, January 1, 2010

Full text of HSA Aviation Security Directive SD 1544-09-06

U.S. DEPARTMENT OF HOMELAND SECURITYTransportation Security Administration
Aviation Security Directive
Subject: Security DirectiveNumber: SD 1544-09-06Date: December 25, 2009
EXPIRATION: 0200Z on December 30, 2009
This Security Directive (SD) must be implemented immediately. The measures contained in this SD are in addition to all other SDs currently in effect for your operations.
INFORMATION: On December 25, 2009, a terrorist attack was attempted against a flight traveling to the United States. TSA has identified security measures to be implemented by airports, aircraft operators, and foreign air carriers to mitigate potential threats to flights.
APPLICABILITY: THIS SD APPLIES TO AIRCRAFT OPERATORS THAT CARRY OUT A SECURITY PROGRAM REGULATED UNDER 49 CODE OF FEDERAL REGULATIONS (CFR)1544.101(a).
ACTIONS REQUIRED: If you conduct scheduled and/or public charter flight operations under a Full Program under 49 CFR 1544.101(a) departing from any foreign location to the United States (including its territories and possessions), you must immediately implement all measures in this SD for each such flight.
1. BOARDING GATE
1. The aircraft operator or authorized air carrier representative must ensure all passengers are screened at the boarding gate during the boarding process using the following procedures. These procedures are in addition to the screening of all passengers at the screening checkpoint.
1. Perform thorough pat-down of all passengers at boarding gate prior to boarding, concentrating on upper legs and torso.2. Physically inspect 100 percent of all passenger accessible property at the boarding gate prior to boarding, with focus on syringes being transported along with powders and/or liquids.3. Ensure the liquids, aerosols, and gels restrictions are strictly adhered to in accordance with SD 1544-06-02E.
2. During the boarding process, the air carrier may exempt passengers who are Heads of State or Heads of Government from the measures outlined in Section I.A. of this SD, including the following, who are traveling with the Head of State or Head of Government:
1. Spouse and children, or2. One other individual (chosen by the Head of State or Head of Government)
3. For the purposes of Section I.B., the following definitions apply:
1. Head of State: An individual serving as the chief public representative of a monarchic or republican nation-state, federation, commonwealth, or any other political state (for example, King, Queen, and President).
2. Head of Government: The chief officer of the executive branch of a government presiding over a cabinet (for example, Prime Minister, Premier, President, and Monarch).
2. IN FLIGHT
1. During flight, the aircraft operator must ensure that the following procedures are followed:
1. Passengers must remain in seats beginning 1 hour prior to arrival at destination.2. Passenger access to carry-on baggage is prohibited beginning 1 hour prior to arrival at destination.3. Disable aircraft-integrated passenger communications systems and services (phone, internet access services, live television programming, global positioning systems) prior to boarding and during all phases of flight.4. While over U.S. airspace, flight crew may not make any announcement to passengers concerning flight path or position over cities or landmarks.5. Passengers may not have any blankets, pillows, or personal belongings on the lap beginning 1 hour prior to arrival at destination.
AIRCRAFT OPERATOR ACKNOWLEDGMENT: The aircraft operator must immediately provide written confirmation to its assigned PSI indicating receipt of this SD.
AIRCRAFT OPERATOR dissemination required: The aircraft operator must immediately pass the information and directives set forth in this SD to all stations affected, and provide written confirmation to its PSI, indicating that all stations affected have acknowledged receipt of the information and directives set forth in this SD. The aircraft operator must disseminate this information to its senior management personnel, ground security coordinators, and supervisory security personnel at all affected locations. All aircraft operator personnel implementing this SD must be briefed by the aircraft operator on its content and the restrictions governing dissemination. No other dissemination may be made without prior approval of the Assistant Secretary for the Transportation Security Administration. Unauthorized dissemination of this document or information contained herein is prohibited by 49 CFR Part 1520 (see 69 Fed. Reg. 28066 (May 18, 2004).
APPROVAL OF ALTERNATIVE MEASURES: With respect to the provisions of this SD, as stated in 49 CFR 1544.305(d), the aircraft operator may submit in writing to its PSI proposed alternative measures and the basis for submitting the alternative measures for approval by the Assistant Administrator for Transportation Sector Network Management. The aircraft operator must immediately notify its PSI whenever any procedure in this SD cannot be carried out by a government authority charged with performing security procedures.
FOR TSA ACTION ONLY: The TSA must issue this SD immediately to the corporate security element of all affected U.S. aircraft operators.
FOR STATE DEPARTMENT: Retransmittal to appropriate foreign posts is authorized. Post must refer to STATE 162917, 201826Z Sep 01, Subject: FAA Security Directives and Information Circulars: Definitions and Handling, for specific guidance and dissemination.
Gale RossidesActing Administrator