I Tried to Buy an Actual Barrel of Crude Oil (2015)

Related Stories and Media

• Commenters link a well‑known (likely embellished) “coal barge to Manhattan” story and other DailyWTF tales as tonal cousins to the article.
• Several recommend Planet Money episodes where reporters actually buy oil and follow it from well to refinery, plus an “Onion King” episode about onion futures.
• The article triggers nostalgia; some recall prior HN threads discussing the same piece.

How Futures and Delivery Actually Work

• Many futures are physically settled at designated hubs (e.g., crude at Cushing, OK), not to arbitrary locations like an office.
• Traders typically close or roll contracts before physical delivery; the hub location is a pricing reference, not where every end user wants oil.
• NYMEX rulebooks precisely specify grade, delivery point, timing, and procedures, enabling high liquidity.

Negative Oil Prices, ETFs, and Options

• 2020’s negative oil futures are discussed: holders were effectively paying others to take on delivery and storage obligations when capacity ran out.
• This created issues for ETFs designed to track futures: they couldn’t go “negative NAV,” so operators bore unhedgeable downside or used contractual escape clauses (e.g., choosing not to track a given month).
• Options models assuming log‑normal (non‑negative) prices broke down, forcing desks to exit or adjust models.

What Futures Are For: Debate

• One camp argues futures “should” mean actual delivery and that financial settlement and speculation distort prices.
• Others counter that:
  • Producers and consumers often hedge financially while transacting physical supply via separate spot contracts.
  • Futures function like “commodity loans” across time, smoothing inventory and price risk.
  • Speculators are necessary counterparties and liquidity providers; hedging alone can’t sustain the market.

Physical Oil, Barrels, and Logistics

• “Barrel” is mostly a unit (42 US gallons), not a literal drum; crude typically moves via pipelines, tankers, and rail, not individual barrels.
• Used drums have secondary markets (trash burning, BBQ smokers, reconditioned drums).
• A trader describes buying ~200,000 barrels per day for refineries via pipelines and ships, emphasizing the astounding scale: ~104M barrels/day globally, traded in large batches (e.g., 10,000 m³, full tankers).

Packaging and Environmental Notes

• Several note that for many products (including bottled water), container cost and carbon footprint can exceed the contents’.
• There’s debate over whether heavier reusable glass could still reduce overall emissions compared with disposable plastics.