Love story II

Benchmark crude oil futures rose to almost US$155 per barrel in July but have since fallen to below US$60 four months later.


Back before July 2008, companies which expected oil prices to continue rising locked in three-month futures contract so that they can protect themselves.


They hedged their fuel cost by buying contracts for fuel at a predetermined price for future delivery and it helps them save millions when oil prices climb.


But when price drop, they have to book the unrealised losses on their account.


But not SP Services Ltd.

They have made the mistakes in locking the three-month future contracts in July for a price of US$155. They have bet the oil would continue on its upward climb.
However, oil began to plunge to US$100, and then US$60.

It was 100-120% drastic drop.

And they have made the wrong bet.

Instead of the helping consumer paying less for the electricity bills, we have to pay even higher bills for the wrong bet made by SP Powergrid.

They should book the unrealised losses and reported in their books.

But unfortunately it was not the case; they passed on the losses.

On the other hand, they book record profits.
And the top management got their fat bonuses, with our money.

Just like the Lehman brother’s minibonds.

They told you beautiful stories, showed the wonderful charts after charts, and explain points by points but did not mentioned that they have made a grave mistakes and this mistake will be undone by us, the consumers.

Trust no more.