Crude oil markets offer opportunities in nearly all market conditions but can be highly volatile. Several factors impact prices, directly (pipeline changes) or on a macroeconomic level (i.e., economic health, weather), making price risk management is critical. ~ The CME Group – Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), New York Mercantile Exchange (NYMEX) and New York Mercantile Exchange and Commodity Exchange, Inc. (COMEX)

1. DEMYSTIFYING
THE COST OF GASOLINE IN HAWAII
THE NEW YORK MERCANTILE EXCHANGE (NYMEX)
THE HAWAII PUBLIC UTILITIES COMMISSION (PUC)
PRESIDENT DONALD TRUMP (POTUS)
Cost of Gas in Hawaii
USA TODAY
Hawaii customers pay $4.17 per gallon of gas, more than anywhere else in the
country. This is actually down considerably from last year, when the price of
gas was $4.40 per gallon. Like in a number of the other high-price states, gas
taxes are especially high in Hawaii. On average, residents pay 49.1 cents per
gallon, more than in all but three other states. Of course, Hawaii is further
away from America's oil production and refneries than anywhere else in the
country. Its location leads to high prices for more than just gasoline. Without
any hydrocarbon supplies of its own, Hawaii must import energy. With 70% of
the states electricity generation powered by petroleum, electricity rates in the
state are also extremely high. As of November, resident paid an average of 37.2
cents per kilowatt-hour of electricity, or more than double any other state.
Source: 10 states with the highest gas prices By Alexander E.M. Hess and Vince Calio. 24/7
Wall St. USA Today. April 6, 2018 https://www.usatoday.com/story/money/personalfnance/2014/03/23/24-7wall-
st-10-states-wit-the-highest-gas-prices/6737771/
HAWAII DEPARTMENT OF BUSINESS, ECONOMIC DEVELOPMENT
& TOURISM, RESEARCH & ECONOMIC ANALYSIS (DCCA)
Crude Oil Prices
In March 2018, the crude oil price increased from the same month last year
and increased from the previous month. The crude oil price at the NEW YORK
MERCANTILE EXCHANGE1
averaged $62.77 per barrel in March 2018 which
was up $13.10 (26.4%) per barrel from the same month last year. Compared to
February 2018, it was an increase of $0.45 (0.7%) per barrel. [Emphasis Supplied]
1 The New York Mercantile Exchange (NYMEX) http://www.cmegroup.com/company/nymex.html/

2. Refnery Processing
According to the most recent data available, Hawaii's refneries imported 2.0
million barrels of foreign crude in January 2018. There was no foreign crude
imported the same month last year.
Source: DCCA Monthly Energy Trends March 2018 http://dbedt.hawaii.gov/economic/energy-trends-2/
INTRODUCTION TO CRUDE OIL
Today's energy crude oil market is truly global. From West Texas Intermediate
(WTI) to Brent and DME Oman, the crude oil market fuels many of the world's
leading economies and impact nearly every nation. Energy crude oil futures
and options provide the tools the industry needs to manage risk.
Source CME Institute. Accessed April 6, 2018 https://institute.cmegroup.com/courses/introduction-
to-crude-oil
UNDERSTANDING CRUDE OIL IN THE UNITED STATES
NYMEX WTI Crude Oil Futures Overview
NYMEX WTI Crude Oil futures is the world's most liquid crude oil benchmark,
providing access to global crude oil pricing with the most diverse set of future
and options contracts.
With WTI competing directly in the global energy markets as the price
discovery leader, open interest continues to grow as customers hedge their oil
market risk.
Volumes on NYMEX WTI Crude Oil Futures (CL) and Crude Oil options (LO)
have been strong, in part refecting the higher levels of volatility in both crude
oil and refned products.
U.S. Gulf Coast. The infrastructure investment in the U.S. Gulf Coast has
transformed WTI into a waterborne crude, with extensive export capacity.

3. The U.S. Gulf Coast comprises approximately 55% of the U.S. crude oil storage
capacity, while Cushing
1
comprises 13%.
The Houston market has become export-focused, with a terminal network with
storage capacity of 65 million barrels and an additional 20 million barrels of
storage capacity projected to come into service in 2017.
The WTI-Brent spread has become a true indicator of value for U.S. crude
exporters. With a target spread trading between a $1 and $2 per barrel
discount to Brent, increased volumes of WTI-linked crude oils may fow to
countries outside of the U.S. and Canada. [Emphasis Supplied]
Source CME Institute. Accessed April 6, 2018
https://institute.cmegroup.com/modules/understanding-crude-oil-in-the-united-states
1
Notes Supplied
West Texas Intermediate (WTI) is a U.S. blend of several streams of domestic
light sweet crude oil. The delivery point is located in Cushing, Oklahoma which
is home to 90 million barrels of storage capacity. It is a crucial hub where
extensive infrastructure exists and serves as a vibrant trading hub for refners
and suppliers.
Source: Source CME Institute. Accessed April 6, 2018
https://institute.cmegroup.com/modules/discover/wti-a-global-benchmark
The Seaway Pipeline links Cushing, Oklahoma to the Houston, Texas export
market, with 850,000 barrels per day capacity. The Transcanada Marketlink
Pipeline provides additional capacity of 700,000 barrels per day Cushing to
Houston. Further, the Magellan BridgeTex and Longhorn Pipelines carry up to
475,000 barrels per day from Midland, Texas to Houston.
Source: Source CME Institute. Accessed April 6, 2018
https:institute.cmegroup.com/modules/discover-wti-a-global-benckmark

4. RIGGED
THE EXPLICIT, EXCLUSIVE TRUE STORY BEHIND THE HEADLINES
THAT DOMINATE THE WORLD STAGE
By Ben Mezrich
Harper Collins Publishers, New York, NY
First Edition – 2007
ISBN: 978-0-06-125272-3
Walking into the New York Mercantile Exchange [NYMEX] for the frst
time was an exhilarating experience.
What's undeniable is that when you sit and watch the foor for any length
of time, you start to understand why Wall Street rules the universe.
There's a saying that an MBA and two bucks will get you a bus ticket. At
the exchange it's worth even less. The foor is the realm of the self-made
man – a place where education, race, gender, and religion all take a
backseat to one's ability to buy low and sell high more often than the
reverse.
On November 14, 2006, the Sultanate of Oman adopted the historic
policy of allowing crude oil to be priced using the daily settlement of the
Oman sour crude contract at the DME [Dubai Mercantile Exchange].
Around the same time, Oman decided to purchase an equal share of the
DME, making NYMEX, Dubai, and Oman partners.
[Clarifcation Supplied]
John D'Agostino – January 2007
The Ivy League Kid who changed the World of Oil from Wall Street to Dubai

5. THE HAWAII PUBLIC UTIILITIES COMMISSION
The Public Utilities Commission (PUC) allows Hawaiian Electric to adjust prices
as oil prices change, but there is a bit of a lag between change in oil prices and
changes in electricity prices.
Historically, a good predictor of electricity prices in the current month is the
average Brent Crude oil price
2
over the previous four months. In our analysis
we found Brent crude oil prices predicted Hawaii's average electricity price
even better than prices reportedly paid by HECO.
2
Note, Supplied. “The WTI-Brent spread has become a true indicator of value
for U.S. crude.” Cited above.
Source: Why are Hawaii Electricity Prices So High? By UHERO – The Economic
Research Organization at the University of Hawaii. April 2, 2014, accessed April 6,
2018 http://www.uhero.hawaii.edu/news/view/273
___________________
Perhaps the greatest obstacle to a renewable-energy future is that our utility,
Hawaiian Electric Industries (HEI), has little or no incentive to transform its
operation into a model more suited for renewable energy.
What's the fx? First, the utility needs to have some skin in the game. Full cost
recovery via rate adjustments – the current regulatory situation – gives the
utility virtually no incentive to be strategic in its management and planning.
The utility's profts ought to be tied to its cost efectiveness, not the size of the
capital outlay.
Without smart policy, we'll only serve the interests of denialists and naysayers
who will point to Hawaii's renewable renewable energy boondoggle as an
excuse for inaction.
Source: Incentives for the Utility By Michael Roberts, UHERO – The Economic
Research Organization at the University of Hawaii. February 26, 2016, accessed April
6, 2018 http://www.uhero.hawaii.edu/news/view/303

6. POTUS
THE TRUMP “TWITTER EFFECT” ON OIL PRICES
By Dr. Kent Moors
April 3, 2018
Oil & Energy Investor
https://oilandenergyinvestor.com/2018/04/the-trump-twitter-efect-on-oil-prices/
Yesterday, oil prices marked their sharpest one-day decline since
February, following the markets as a whole.
By 2:30 P.M. Eastern, the West Texas Intermediate (WTI) had dropped 3%
for the day, while Bent was down 2.3%.
Before Monday's drop,both WTI and Bent were in a middle of an
impressive rally ̶ WTI had been up 6.5% for the month as of Thursday,
while Bent had been up an even heftier 8.6% for the same period.
And when we look at oil prices for the year, both are now at pricing
ranges I had predicted for the end of June.
So a pullback was certainly in order.
Yet, that's what happened yesterday.
None of the factors normally associated with a proft-taking environment
̶ a spike in U.S. production, s decline in demand, a rise in surplus stock,
or a signifcant rise in the value of the dollar ̶ was present.
This was not a market-driven excuse for a sellof.
This one came DIRECTLY FROM THE WHITE HOUSE.
[Emphasis Supplied]