Commercial Oil Glossary

Commercial Oil Terms Glossary

AGGREGATION
The organization of small groups, businesses or residential customers into a large, more effective buying unit that strengthens their purchasing power.
AGGREGATOR
The entity that combines customers into a buying group for the purpose of increasing the groups’ purchasing power.
BARREL
A barrel of oil is equivalent to 42 gallons.
BASIS
The differential that exists at any time between the cash price (or “spot price”) of a given commodity and the price of the nearest futures contract for the same or a related commodity. Basis can reflect different time periods, product forms, product qualities, or locations. Cash minus futures equals basis.
BOILER
A device that utilizes energy to convert water to pressurized steam.
BRITISH THERMAL UNIT (BTU)
The amount of heat required to increase the temperature of one pound of water one degree Fahrenheit. The standard unit for measuring and comparing heating values and pricing for different fuels.
CELSIUS
A measure of temperature based on the freezing point (0 degrees Celsius) and boiling point (100 degrees Celsius) of water.
COMMODITY
An article of trade or commerce that can be resold.
COMMODITY COST
The cost of a commodity (natural gas, oil) and related expenses incurred to bring that commodity to market.
COMPETITIVE MARKET
A marketplace that encourages buying and selling between many different parties.
CONSERVATION
The preservation, management, or restoration of natural resources.
CONSUMER EDUCATION
Information and skills provided to consumers to help foster informed decisions.
CONSUMPTION
Amount of fuel usage.
CONTRACT
1) A term of reference describing a unit of trading for a commodity future of option.
2) An agreement to buy or sell a specified commodity, detailing the amount and grade of the product and the date on which the contract will mature and become deliverable.
CONVERSION FUEL FACTOR
A number stating units of one system in corresponding values of another system.
CRUDE OIL
Petroleum in its natural state, before it is refined into various oil distillates.
CUSTOMER OBLIGATION
The responsibilities that a customer has toward their supplier such as paying bills, maintaining safety of a natural gas hook up, and reporting theft of service.
DEGREE DAY
A measure of the coldness of the weather (known as a heating degree day) or its heat (known as a cooling degree day) based on the extent to which the average temperature falls below or rises above 65 degrees Fahrenheit.
DEMAND
The volume of goods or services necessary to satisfy the marketplace.
DERIVATIVE
A financial instrument derived from a cash market commodity, futures contract or other financial instrument. Derivatives can be traded on regulated exchanges.
DIESEL OIL
Fuel for diesel engines obtained by the distillation of petroleum.
FAHRENHEIT
A system of measuring temperature in which the boiling point of water is 212 degrees and its freezing point is 32 degrees.
FEDERAL ENERGY REGULATORY COMMISSION (FERC)
An independent regulatory commission within the U.S. Department of Energy that has jurisdiction over energy producers that sell or transport fuels for resale in interstate commerce; the authority to set oil and gas pipeline transportation rates.
FIXED PRICE
A price option that gives customers a “locked in” price for a specified length of time. A fixed price protects the customer from any increases in the cost of a commodity during the length of the contract.
FORCE MAJEURE
A standard clause that indemnifies either or both parties to a transaction whenever events occur which are beyond their reasonable control.
FUEL
A substance that can be burned to product heat.
FUEL ADJUSTMENT
Adjustment of the bill as the fuel costs increase or decrease for the provider from a specified amount per unit. Amounts of adjustments are based on variance from pre-determined base costs of fuel. The fuel adjustment shows as a line item on customer billings.
FUEL OIL
Petroleum distillates that produce heat or power when burned.
GALLON
A U.S. gallon has 231 cubic inches or 3.785 liters.
HEATING LOAD
The rate at which heat must be added to a space in order to maintain the desired temperature within the space.
INJECTION
(Petroleum) Forcing gas or water into an oil well to increase pressure and cause more oil to come to the surface.
KBTU
One-thousand (1,000) BTUs
LIQUID MARKET
A market characterized by the ability to buy and sell with ease.
LOW-SULFUR OIL
Oil having one percent or less of sulfur by weight.
MARKET-BASED-PRICE
A price set by the competitive nature of the market.
MARKETER
One that sells goods or services in or to a market, especially one that markets a specified commodity.
MMBTU
One million British Thermal Units. Equal to one dekatherm. Approximately equal to one thousand cubic feet (MCF) of natural gas.
NUMBER 6 FUEL OIL
A very thick, heavy fuel source left over after other fuels have been distilled from crude oil. Number 6 oil is most often used in commercial applications.
OPTIONS
A contractual agreement that gives the holder the right, but not the obligation, to purchase or sell the underlying futures contract at a specified price within a specified period of time in exchange for a fee.
PEAK
Periods of relatively high system demands.
PETROLEUM
Oil as it is found in its natural state under the ground.
PIPELINE
A line of pipe with pumping machinery and apparatus (including valves, compressor units, metering stations, regulator stations, etc.) for conveying oil or gas.
PRICE CAP
Contract where fuel is available at a price not to exceed a maximum agreed to price for the life of the contract.
REFINERY
A facility that distills crude oil into the many different oil products.
RESIDENTIAL BUILDING
This encompasses single and multi family homes or buildings.
STRATEGIC PETROLEUM RESERVE
Government owned and controlled crude oil stockpiles stored at various locations in the country. These reserves can be released in response to severe oil supply disruptions or at such times as the government sees fit.
STRIP
The simultaneous purchase (or sale) of futures positions n consecutive months. A six-month strip, for example, consists of an equal number of futures contracts for six consecutive contract months.
STRIP PRICE
The average of the prices for the consecutive futures contracts bought (or sold).
TARIFF
A schedule of rates or charges permitted a common carrier or utility by the governing body. Pipeline tariffs are the charges made by pipelines for transporting crude oil, refined products, or natural gas from an origin to a destination.