Forward Fuel Price ; Is it Fair?

8 October 2008

Introduction
EMA used forward fuel oil pricing (FFOP) quoted in July 08 for the next 3 months to peg electricity rate in Singapore; as a result, the electricity rate went up by 21%. This article will examine if this FFOP is a fair peg.

What is Forward Fuel Oil Price(FFOP)?
FFOP is quoted in a forward market just like the Futures market in New York Mercantile Exchange (NYMEX). But unlike the Futures market, the forward market is less price transparent because the forward contracts are traded informally between principals such as big oil companies who are not obliged to publish the details of any deal that is done. For more details about forward fuel oil contracts, please refer to this article.

Why the High FFOP?
EMA explained that the FFOP quoted in July 08 for delivery of fuel oil between October 08 and December 08 is being used to determine the electricity rate for this period. As the fuel oil price increased sharply in July this year, there was a corresponding spike in the July forward fuel oil price for October 08 until December 08. This appears on the surface to be very fair to both the Power Generating Companies as well as the consumers.

Why July's FFOP Not Reflective?
Rightly speaking, if fuel delivery is for period between October 08 and December 08, it should reflect the present fuel oil price; however, this is never the case. Lets examine the oil prices quoted in the NYMEX (FFOP is not available) for delivery in Feb 09 and for delivery in Nov 08. One could immediately identify that these 2 quotes are almost identical.

Doubleclick for enlarged picture

Doubleclick for enlarged picture

Why So Identical ?
This is because the Oil Price for future delivery is always affected by the prevailing spot price. When the traders do not know what is in stored for them in the future, they would invariably use the present spot price as the base price.

What's the Implication?
The FFOP quoted 3 months ago will be forever lagging behind the spot or the present fuel oil price. If the oil price continues to climb, the electricity rate will become very reasonable; on the other hand, the electricity rate would become very unreasonable if the oil price continues to fall.

Is It Fair to Use FFOP?
On the surface, it would appear very fair to use FFOP to peg electricity rate because SP and the Power Generating Companies will take actual delivery of the fuel oil at the end of the period. On further examination, it would appear to be unfair to the consumer because:-

a) This FFOP rate is less transparent; for example, the NYMEX Futures for oil was quoted at US $ 147 per barrel at the peak of July 08 whereas the FFOP used to peg the electricity rate was quoted as US $ 155 per barrel. Whether the FFOP deal in July 08 was done at its peak is not known publicly;

b) FFOP contracts can be traded in the market. If SP and Power Generating Companies found advantages to trade the contracts, they can do so and buy cheaper oil from the spot market;

c) It is very common for oil consumption companies, such as airlines and power generating companies to hedge present fuel oil price against any future price variation. For example, SIA has been known to hedge its jet fuel oil price. With the correct hedge, they will never lose out and might even gain handsome profits. On the other hand, the consumers will never have any choice but the pay for the electricity rate.

Conclusion
The FFOP as a peg for electricity rate does not seem to be fair to the consumers who have no alternative but to pay for the electrcity rate.

Afternote:

1. EMA was referring to SWAP fuel oil pricing as Forward Fuel Oil pricing

2. The USD 155 per barrel should be read as SGD 155 per barrel

Related Articles

1. Confusion in the use of Forward and Swap Fuel Oil Pricing
2. Forward Fuel Oil Pricing Used By EMA

Refrigerator Repair

1 December 2009

Repairing RefrigeratorsRefrigerator is one of the most common household equipment. This article will give some tips on how to locate and repair some common faults in refrigerators

What are the common faultsModern refrigerators need little or no maintenance except for the regular cleaning of blocked ventilation holes if it is located in a dirty environment. Poor cooling is often caused by faulty or aged components. One of the common fault is frozen cooling coils. Other faults can be motor related; for example, motor starter problem. Because the refrigerant system is a total sealed system, leakage of refrigerant is not usually the problem.


How to Check if the Fridge is Working Properly
A working fridge should:

1) Feel warm on some part of the panel. This is because fridge uses these panel to dissipate heat;

2) Have noise coming out of the electric motor;

If the fridge panel is always cold or there is no running motor noise for a long period, most likely the fridge is dead; otherwise, it could be due to the following problems:

a) Frozen cooling coils
b) Faulty components

This article will concentrate on how to clear frozen cooling coils

Frozen Cooling Coils

Frozen cooling coils could happen under 2 conditions:-

a) Refrigerator is short of freon gas;
b) Faulty defrosting circuits

Like any refrigeration equipment, coils are easily frozen when there is a shortage of freon gas in the system. However, this is quite unlikely in the case of refrigerators because most refrigeration system is sealed and there is little chance for freon leakage. When the coil is frozen, it will not allow air to pass through the colling coil and hence, cooling is affected.

Checks for Frozen Cooling CoilsModern refrigerators are frost free. Cooling is achieved by a circulating fan and defrosting is done by a defrosting heater.





Because the cooling coil and the fan are hidden from view, visual inspection is often not possible. However, one could deduce if the coil is frozen by checking if the compressor is working and also by observing if defroster is functioning.

How to CheckStep a) Check if the defroster is working
If the refrigerator has a defrosting tray underneath, check the tray for some water. The defrosting heaters will be turned on automatically once a day by a self running time, during which, ice if any on the cooling coil will be drained to the defrosting tray.

For refrigerator that has concealed defrosting tray, then the only way to check if the defroster is working is to turn off the refrigerator for more than 1 hour, allowing ice to be defrosted. If by turning on the refrigerator resume the cooling function, one can confirm that the defroster circuit is faulty; then, proceed to step c);
Important Note: The compressor panel consist of electrical components. Proceed to step b) & c) when you know what you are doing.
Step b): Check if the compressor is working properly
1) Open up the compressor chamber by removing the back panel of the refrigerator;

2) Check for oil leakages in the refrigerator pipe and tube; if there are traces of oil anywhere, most likely the system have a freon leak;

3) Check if the compressor motor is running. If it is running, check for its proper working by hand feeling the temperature of the compressor's discharged and the suction tubes. One should notice the discharged tube is always warm and suction tube is always cool. If there is not much temperature difference, most likely the compressor is not working properly and it is time to change the refrigerator.

Step c)
The defrosting components normally consist of a timer and a few heaters. Check the heater circuit for fault using an ohm meter. If the heaters are ok, most likely the timer is fault. Repair or replace the timer.

The Foward Fuel Oil Price Used by EMA

5 October 2008

Introduction
The Energy Market Authority (EMA) recently announced that our electricity rate would increase by 21%, the highest one-time increase in seven to eight years. This is because EMA has pegged the electricity rate to the forward fuel oil pricing for the next 3 months.

EMA’s Explanation for the Price Hike
EMA, the electricity and gas industry regulator, explained that since 2004, electricity tariffs had been pegged to the "forward fuel oil prices" for the next three months. This price was $155.14 per barrel, up 38 per cent from $112.35 per barrel for the current quarter.

What is “Forward Fuel Oil Price” ?
There are about 4 types of oil market:
a) The Spot market
b) The forward market
c) The Futures market
d) The Swap and options market

More information about the various oil markets can be found here
There are also more about futures and forward contracts in here and here.

Forward contracts are traded in the forward market. Like the futures contracts, forward fuel oil contracts are traded for the delivery of fuel oil on a future date at a pre-agreed price; but unlike futures contracts, the forward contracts are traded informally between principals such as big oil companies who are not obliged to publish the details of any deal that is done. The forward market has therefore lesser price transparency than a futures market such as NYMEX Oil Futures traded in the US.
Deals in forward contracts are usually done over the telephone. Participants either trade directly between each other or through specialist brokers (like Goldman Sachs) who provide a useful service by quoting bid-ask levels for forward Contracts. The main difference between forward and futures trading is as shown in the following table:
Why EMA used Forward Pricing of Fuel Oil?
EMA explained that “forward fuel oil” prices are the prices of fuel delivered to the Power Generating Companies; also, they are less volatile than the 'spot oil' prices quoted for immediate deliveries. To illustrate, EMA used the following graph:-

While there is no way to verify the authenticity of the forward fuel oil prices quoted by EMA, the following 2 curves in this article about forward contracts of West Texas Intermediate (WTI) and Brent will illustrate that forward pricing can also be very volatile.

Correct for EMA to use Forward Pricing?
Forward pricing, like future pricing, is often used as a hedge against any future price variation . If it is used for other purpose, it can act as a double-edged sword, working for as well as against an investor. In this case, as a peg for electricity rate for the next 3 months, it will work for consumers if the oil price is rising and against the consumers if the oil price is falling. Furthermore, EMA uses forward fuel oil pricing quoted 3 months ago, it is forever lagging months behind the actual fuel oil prices.

Forward pricing is less transparent as spot pricing. To protect the interest of the consumers, it would be better to use the spot or futures pricings that are traded in public exchanges such as NYMEX.

Will SP & Power Generating Companies lose?
SP and Power Generating Companies will not lose out with any price set by EMA if the set price has been agreed upon. This is because SP and Power Generating Companies can always hedge against any future fuel oil price variations. SIA's hedging policy on jet fuel price is one of the good examples. On the other hand, if consumers were to be asked to pay higher fuel price today for the next 3 months and if SP and the Power Generating Companies could hedge the future price correctly, they stand to earn a good profit.

As no contract or hedge will be able to cover all future price variations, at some point, consumers inevitably will have to pay for any higher fuel cost incurred by SP and Power Generating Companies. This is when EMA can come in to mitigate. Asking the consumers to pay electricity rate upfront based on a forward contract price is not necessary the way to protect the consumers’ interest.

Conclusion
EMA has chosen the forward fuel oil pricing to be "peg" to evaluate electricity rate but this pricing has lesser transparency. They also used forward fuel oil pricing quoted 3 months ago. There will always remain a question as to whether this forward fuel oil pricing is a good peg to protect the consumers' interest.

Afternote: EMA was referring to SWAP fuel oil pricing as Forward Fuel Oil pricing

Related Articles

1. Confusion in the use of Forward and Swap Fuel Oil Pricing
2. Is it fair to use Forward Fuel Oil Pricing?

Repairing Ultrasonic Humidifier

2 October 2008

Ultrasonic humidifiers have been used extensively in temperate as well as in tropical countries. They are used to keep room humidity at comfortable level. They are pretty cheap and simple to operate. They need little maintenance except for the frequent topping up of the water. This article will describe the workings of various electrical and electronic components and touch on how to repair some common faults.

What is Ultrasonic humidifier (UH) ?

Please refer to this article




What are the components inside the humidifier?

The humidifier consist of the following components
a) Control Panel (analogue or digital)
b) Mechanical fan
c) Water container and water level sensor
d) Electronic ultrasonic Generator
e) The piezo-electric transducer






How do these work?

a) Control Panel

Analogue or digital type. This panel will allow users to control the amount of mists generated and/or speed of the fan. Some humidifiers have built-in humidistat that will regulate the amount of mist to a preset control;



b) Mechanical fan

This is usually a small mechanical fan used to distribute the mists. It is made from using a small single-phase shaded pole a.c. motor with a centrifugal fan attached.
c) Water container and water level sensor (aka float switch)

The water container is usually an inverted container that can hold about 4 to 5 litres of water, enough for one day’s operation. The top end of the container is always sealed such that as water is being drawn from the container, it will create a vacuum on top of the container which will hold the water above the water level. All UH has a water level sensor or float switch that will stop the operation of the humidifier when the water level is low.



d) Electronic Ultrasonic Generator

This usually consists of a power switching transistor arranged as a Colpitts oscillator to provide power to the piezo-electric transducers. The oscillating frequencies are around 0.8 MHz to 1.7 MHz.




e) The Piezo-Electric Transducer
Connected to the output of the electronic ultrasonic generator is the peizo-electric transducer, which looks like a 50 cts coin or a lithium battery of that size.

During the humidification process, the peizo-electric transducer will vibrate at ultrasonic speed and water will be broken up into mists of 1 to 3 microns when they come into contact with the vibrating transducer.

What Can Go Wrong?

When the humidifier stop working, it could be due to many factors but this article will concentrate on one of the most common problem: the humidifier is working but it is just not strong enough to create the mist. Some water circulation is seen on top of the transducer.

There are a few reasons:
a) Clogged Transducer

This normally don’t happen if one uses soft water as recommended and cleans the transducer often. However, should a de-scaling required, do not use any chemical or soap or scrap the transducer surface with any hard objects. They might attack or damage the thin coatings of the transducer. A soft brush, brushing the surface may be sufficient. If this cannot remove the scaling, try some soft cleaners such as alcohol or other soft cleaners and rub against the surface of the transducer softly.
Handle the transducer with care. Transducers are made of ceramics. They are hard and very brittle. They will break into pieces once they fell onto the floor.
One can buy replacement ceramic disc from some aquarium shops that sell mist makers for fish tanks. They are packed together a key as shown and they are pretty cheap.

b) If the cleaning of the transducer does not work, it is likely that the oscillator may be at fault. It might be due to the following reasons:

1) Faulty Power Supply Unit

The power supply is from a 35-40 volts power transformer. This power is fed to a set of 4 diodes that form a rectifier bridge. The output of the bridge is filtered by a smoothing capacitor in the range of 2 to 50 uF (C5 or capacitor connected immediately after the bridge). If this smoothing capacitor is faulty, it will not deliver enough d.c. power to the oscillator circuit
2) Faulty Oscillator

The capacitors that form the oscillator could have been faulty and as a result, the oscillator is oscillating at other frequencies that could not deliver enough power to the transducer

3) Fault Power Switching Transistor

If this transistor is faulty, it is likely that oscillator will not work. Check the transistor for proper operation. Not every transistors are made the same for operation. Equivalent transistor may not work properly.


Schematic Circuit of other Brand
 Other reference circuitary on application of ultrasonic transducers can be found here.

Fuji Ceramics Corporation

Note: If you find schematic diagram of other brands, please email me.


4) Bad Contact at the Transducer

The transducer is usually connected to the circuit through a spring to allow the transducer free to vibrate. Bad electrical contact between the spring and the transducer may cause the unit to stop working. Dismantle the transducer and polish the contact surfaces at the transducer and the spring to ensure good electrical contact.

Related Articles
1. Soft Water Supply for Ultrasonic Humidifiers
2. Cut Electricity Bills by up to 90%

Cut Your Cooling Bills by 50% to 90%

1 October 2008

Introduction

Electricity rate in Singapore went up by 21% from 1 October 2008 from $0.26 per kWh to $ 0.30 per kWh. It is likely that this rate will remain high because of the ever increasing higher energy consumption that has driven up the energy price. We are addicted to comfort living and working nowadays. This article will tell how one could use available gadgets in the market to get some desired cooling and to cut electricity consumption by as much as 90% at the same time.

How?

a) Cut up to 50% by reducing the space of cooling and by introducing spot cooling. Please refer to article for this method ;
b) Cut up to 90% by using ultrasonic humidifiers (UH) and fans for direct cooling. This article will concentrate on how this can be done.

Using Humidifiers in Singapore?  (added 17 December 2021)

Some doubted that Singapore,  being a tropical country with very high humidity, is not place suitable to use humidifiers for cooling.   This is quite true especially when this kind of cooling is less effective in areas of higher humidity.  Buut one can still feel the cooling because the fans will help to evaporate those mists that fell onto the face and body faster than those from other parts of the body.   This cooling is like one cleans his face with a piece of wet cloth and stand in front of a fan.     Moreover,  in a hot dry weather day,  Singapore's humidity at certain parts can be as low as 70%. 

What is Ultrasonic Humidifiers (UH)?

It is an electro-mechanical device that can generate aerosol mists, much like the steam vapour that we produce when we boil the water. UH is cheap and easily available in Supermarkets, Homefix etc. They cost around $ 80 to $ 300 per unit.

How does UH work?

UH has 3 basic components:-
a) an ultrasonic vibration unit to generate the fine mists;
b) a small mechanical fan to distribute the mists and
c) a water container


The more sophisticated ones may have various controls for the fan speed and humidity adjustments. The heart of UH is a piezo-electric transducer that looks like a 50 cts coin or a Lithium Battery cells of that size. This transducer is electronically driven to vibrate at frequencies in the range of 0.8 MHz to 1.7 MHz. When water comes into contact with the vibrating transducer, the water is immediately broken down into fine mist, about 1 to 3 micron in diameter. Unlike boiling of water, no heating is required to produce this mist and therefore, little energy is used for the operation. A medium sized UH would consume only about 50 Watts of electricity.

How Effective is the UH Cooling?

UH will not be able to cool a room to the comfort of an air-conditioning unit especially in a hot and humid environment like Singapore. However, its direct cooling effect is much better than an electric fan. This cooling feels like when we are next to a strong water stream when we are in a shower.
Normally, Singapore's ambient air temperature stays around 23 -34 oC with humidity varies from 60% in the afternoon to 100% during rainy days. One can expect UH to lower the cooling temperature by 2 to 4 0C according to the following table.


UH will work better under a high ambient temperature and low humidity environment. Further cooling effect can be achieved if a strong mechanical fan can be used to create Flash Cooling.

What are the other Advantages?

Besides saving electricity, the unit will operate quietly with very little maintenance except for the frequent topping up of water as it evaporates. For those who constantly stare at computer screens, the higher room humidity will help them keep their eyes moist to prevent “dry eye” problem. Because UH operates at ultrasonic frequencies, it should have some bacteria killing effects.

What are the Health Concerns?

UH operates in frequencies between 0.8 to 1.7 MHz. This range of frequency is known to have effect of killing germs or microbes . However, there were no evidence that commercial UH also have these effects.
UH, like all equipment, will require regular maintenance to keep the unit hygienically clean. Legionnaire's bacteria , said to be found in water systems such as cooling towers and evaporative condensers, has not been reported in UH applications.

What about People with Rheumatism?

Scientists have found that weather or temperature and humidity's variation doesn’t cause rheumatism and doesn’t damage joints but they did find that weather does affect the severity of rheumatic pain. This is because bones, tendons, muscles, and joints have different densities and expand or contract differently when exposed to drops or rises in temperature and humidity. These weather sensitive people may found it uncomfortable with this kind of cooling.

What Water to be Used?

Ordinary tap water can be used if they are soft water (contained less minerals); however, distilled water is recommended by most manufacturers. Hard water has been found to be not suitable for UH because they have bicarbonates and sulfates that will form scaling to "kill" the transducer.
Distilled water is expensive although there are other alternatives. It may be more cost effective to use ordinary tap water and have the piezo-electric transducer replaced regularly.

Getting soft water from air-conditioning units is one good alternative to save money.

What size of a UH Unit should I purchase?

There is a co-relationship between the moisture of room air and the additional moisture to be added to achieve the desired cooling effect. One could use a psychromatic chart to determine the number and the unit sizes if one wishes to cool the whole room. However, for the purpose of achieving a direct cooling and not room cooling, a medium size UH that is capable of delivering about 400 ml/hr has been used successfully.

Related Articles
1. Soft Water Supply for Ultrasonic Humidifiers
2. Repairing Ultrasonic Humidifiers

30 Sept 2008

Is 7% losses on 29 Sept 08 the Largest in DOW?

The losses of about 7% on 29 Sept 2008 is not the largest in DOW's history. The following table will show that there are about 18 times that DOW lose more 7% or more. The last time was in 17 Sept 2001 when DOW lose 7.13%, after the terrorist attack on 11 Sept 2001. Google showed that DOW had done 368 mil which is 150% of the average volume of 240 mil. on 29 Sept 2008.


As for the gains, there are about 19 times that DOW has gained more than 7% as shown in the following table. The last gain of larger size was in 21 Oct 87. That time DOW gained a hefty 10%.

27 Sept 2008

Documentary Film of The Stock Market Crash in 1929

The full video come in 5 parts, each about 4 minutes. Click the button to view the various parts. To return to this page after viewing, click "Back" button




If you are in a hurry and prefer a condensed version that contains only the documentary, click here to play (8 minutes)

26 Sept 2008

Interesting videos about the WallStreet Bailouts...

Video 1: Bush Sounds the Alarm



Video 2: THEY WANT MAMA



Video 3: Let's Play "WALLSTREET BAILOUT"

26 Sept 2008

This is an interesting video that attempts to talk about how money was created and manipulated in the history of United States.
It is an old documentary made before 1996; but many points raised in the video are quite relevant in today's context.

Note that this video is about 3 hours long and the information contained therein have not been verified but it is entertaining. The video pointed out that it was meant only for educational purpose so that people would be aware of how US money was created and manipulated.

For those who just wanted to know about:

a) the Crash in October 1929 that was described in the video (about 5 minutes);
b) the Federal Reserve Board of United State is a quasi government organisation. It was said that Goldman Sac and Lehman Brothers are two of the stockholders. (10 minutes);
c) the Market Crash is not the Cause of a Recession (1.5 minutes)

Follow this link

Short Clip of Money Maker

This short clips are part of the film "Money Maker" widely circulated in the Net for public viewing. The audience are advised to check the facts and verify themselves before taking any further action.

Video 1: Federal Reserve Board, a quasi government organisation (10 minutes)

It was said that Goldman Sac and Lehman Brothers are two of the stockholders.


Video 2: The Crash in October 1929 (about 5 minutes)



Video 3: Market Crash Not the Cause of a Recession (1.5 minutes)