Restoring Confidence in US Energy Trading
The California energy crisis and the collapse of Enron were major blows to the US and other energy derivatives markets, but the industry has taken steps to restore trading activity and confidence in these valuable risk management tools. The turnaround for energy trading has started. The industry is focused on reform and solving the problems of the past. Codes of conduct, better contracts, better ways to mitigate credit risk, through improved collateral management, netting and/or clearinghouses, are all under way. Prepared for the International Swaps and Derivatives Association (ISDA), from its paper Restoring Confidence in the US Energy Trading Markets.
By Louise Marshall.

Why is it That the Ocean Freight Market is Never Where it Ought to Be?
Dramatic increases in some commodity prices have been mirrored by dramatic increases in freight rates over the past year – in part reflecting the falls in the US$ in which many are denominated. Traditional models have failed to forecast this trend so is there a better way of making predictions of volatile shipping markets?
By Pierre Aury, Clarkson Capital Limited.

Aluminium: Growing Demand & Fund Activity
In common with many other commodities aluminium prices have rallied appreciably in the last 24 months. The reasons for the rally are varied and apply to both supply and demand categories, and have similarities with other commodities, especially other base metals. The optimism surrounding world growth, the constant speculation on China’s emergence as a major industrial power, the intervention of the funds and the weakness of the US dollar and American external positions will likely inject an added element of volatility into the aluminium market.
By Jim Steel, Refco.

Energy Business Awards, 2003
The Energy Business Awards, 2003, were recently announced at EMART Energy in Amsterdam (25-26 November). These Awards, now in their second year, have been designed to reward excellence in a number of key energy business disciplines – those companies and individuals who are making a significant mark on the way energy business is conducted, trading risks mitigated, precious energy resources utilised, energy systems developed, environmental degradation curtailed, energy technology advanced, and energy production and consumption distributed more ethically. Thus, these Awards are intended to reward those who are making a positive impact on energy business development. The 2003 category winners, based upon nominations and the opinions of the Awards Panel, are shown here.

The Missing Link: Integrated Customer & Commodity Management
Forecasting demand with precision is critical to all utilities in today’s volatile energy wholesale markets. New supply alternatives and increases in demand and price volatility make energy a variable, not fixed price commodity. To get the best value for their energy spend utilities need to know how much energy is consumed, when and by whom.
By Paul Grey, Chief Technology Officer, Peace Software.

IT in the Post-Enron Global Economy
Much of the business world is still living in the shadow of an economic downturn, and the IT industry is enduring painful times as CFOs have had to squeeze IT budgets and demand greater efficiencies, as they have done with all departments. But anticipation that this period is coming to an end is creating some hope for weary CIOs everywhere.
By Was Rahman.

Energy Investment Outlook
In November, the International Energy Agency (IEA) issued what it believes to be the first comprehensive and authoritative picture of future energy investment needs worldwide, in all parts of the energy-supply chain – World Energy Investment Outlook 2003.

Softs for 2004
After stuttering a little in early 2003, soft commodity prices, as measured by the Economist Intelligence Unit’s (EIU) food, feedstuffs and beverages (FFB) index, continued to rise in the third quarter of the year. Soft commodity prices, although volatile, will tend to rise throughout the remainder of 2003, into 2004 and 2005, driven higher by a combination of stronger economic growth and the effects of 2003’s drought related crop damage.
By Matt Parry, Economist Intelligence Unit.

Why Oil Trading & Paper Markets Are Different in Asia Pacific
The Asia Pacific region is now recognised as the major growth area for energy demand taking centre stage for oil, gas and electric power investment. However, Asia Pacific has vastly inadequate local crude oil production relative to its expanding needs and will need increased imports from outside the region, particularly from Middle Eastern producers. Coupled with governmental policy changes encouraging deregulation, privatisation and foreign investment, the future appears bright; yet risks prevail. Deregulated markets bring with them competitive risks. Thus, energy risk management rises in importance in such a changing market environment.
By Peter C. Fusaro explains.

A Hybrid Modelling Approach to Manage Physical Asset Risk
In this article we present an overview of the FEA Power Sector Model. This model has been specifically designed to help energy market participants in integrating price and volume risk, and provides a framework for valuing and measuring the risk of a wide range of contracts and assets whose value is contingent on the inter-dependence between weather, load, fuel and power prices.
By Carlos Blanco, Josh Gray & Marc Hazzard.

Risk Management of Temperature-Dependent Power Positions
In this article we consider some of the issues involved in the valuation and risk management of physical power assets for which the plant’s performance is influenced by temperature. We adopt a market point of view, in which these are merchant assets which derive their value from their ability to be operated flexibly in conjunction with the traded power and fuel markets. We are most likely to consider peaking plants, and so we will typically need to consider flexibility and valuation at the hourly, or even half-hourly, resolution. In adopting a market perspective we are not considering balancing mechanisms, which do not play the price discovery or hedging roles of the traded markets.
By Steve Leppard, Gaselys.