Introduction to Energy Markets
December 8, 2012 May 17, 2012
Registration Fee: US$995.00 Register Location Instructor
Many classes sell out; we suggest registering at least one week in advance to ensure availability.
Intermediate Level, 7 CPE Credits
Instructor: David Oakes
Hours: 9:00 am - 5:00 pm; Registration/Breakfast begins at 8:30 am
Course Objectives
Energy markets play a key role in the economy, but the structure of these markets is complex and analysis of factors driving pricing and risk can be difficult for outsiders with limited knowledge of the physical operations involved in energy production. Taking this course will help you develop a deeper understanding of how these dynamic and important markets work and make you better prepared to take advantage of the opportunities they provide for trading on views of energy prices or volatility and hedging energy price risk.
Course Outline and Learning Outcomes
Session 1: Crude Oil and Petroleum Products
We begin by describing the physical and derivatives markets for crude oil and petroleum products. By the end of the session, you will be able to:
- Describe the physical processes associated with crude oil exploration, production and refining
- Describe and analyze global patterns in crude oil reserves, production, consumption and transportation
- Identify factors affecting spot and forward prices for crude oil
- Outline the ways in which physical crude oil is traded
- Describe the structure of the downstream petroleum industry (refining, transportation and marketing) and discuss factors affecting prices for downstream products
- Explain how financial contracts linked to crude oil and petroleum product markets, including futures contracts, fixed-for-floating swaps, basis or differential swaps and synthetic storage, are used to express market views and hedge risks
Session 2: Natural Gas
In this session, we describe important features of the physical and derivatives markets for natural gas. By the end of the session, you will be able to:
- Describe the physical processes related to natural gas production
- Describe and analyze global patterns in natural gas reserves, production, consumption and transportation
- Identify factors affecting spot and forward prices for natural gas
- Discuss the ways in which increased exploitation of shale gas and other unconventional sources of supply are affecting natural gas reserves and prices
- Discuss the impact of regulation on natural gas markets
- Outline the ways in which physical gas is traded
- Explain how financial contracts linked to natural gas markets, including futures contracts, fixed-for-floating swaps, basis swaps and synthetic storage, are used to express market views and hedge risks
Session 3: Electric Power
In this session, we describe key features of physical and financial markets related to electric power generation in North America. By the end of the session, you will be able to:
- Define and explain key terms and concepts related to power generation
- Analyze the relationship between electricity prices and the costs of primary energy sources
- Describe the major changes in regulation that have influenced the development of North American electricity markets
- Explain the role of regional transmission organizations (RTOs)
- Describe the operation of wholesale spot electricity markets
- Identify factors affecting forward prices for electricity
- Describe and discuss applications of power swaps and other derivatives
- Explain the roles of locational marginal prices and congestion revenue rights in ensuring reliability and managing risk in electricity markets
Prerequisites
Participants should understand simple financial concepts such as present value and have a basic knowledge of derivative instruments (forwards, futures, options and swaps). No prior knowledge of energy markets is assumed.