Distillate Supply and Risk Management Programs

Floating Price Contract

Provides customers guaranteed supply at a fluctuating price that is competitive with daily rack values in their market area. The floating price "basis" is generally based on a differential to OPIS or Platt´s Gulf Coast values or another mutually agreeable daily rack posting.

Fixed Price Contract

Provides customers guaranteed supply and a firm fixed price during the specified delivery schedule. Fixed Price contracts protect customers from rising markets and insure meeting established budget objectives.

Fixed Price w/ Downside Protection

Provides customers guaranteed supply at a firm fixed price during the contract delivery schedule with a supplemental agreement to hedge the risk of prices falling below a specified value. Downside protection is settled financially with customers.

Cap Contract

Provides customers guaranteed supply at a floating price that does not exceed a specified maximum during the delivery schedule. A Cap provides customers the right to purchase fuel oil at a ceiling price when the market price is higher and at a market related price when it is lower.

Collars

A low premium cost hedging strategy that assures the customer guaranteed supply with a specified minimum and maximum price for contract gallons. This allows customers to limit exposure to upward price movements at a lower cost than a cap, but limits the downside participation in market.

Swaps

Provides customers a means to hedge price risk for products while continuing to purchase physical barrels from existing supply sources. A fixed price swap would reference a floating price. If that floating price during a contract month exceeded the fixed price, the customer would be compensated financially for the difference.