Over a barrel: A day that shows how the global business of oil hits home in NJ

From NJ.com
by Jeff May and Tom Johnson/The Star-Ledger
Sunday June 29, 2008, 12:01 AM

Eric Bolling settles into his desk and glances at the computer screen.
"Holy crap," the 45-year-old commodities trader murmurs.
It is Thursday morning and the New York Mercantile Exchange has opened a few minutes earlier at 9 a.m., and the price of crude oil is already up $4, to $138 a barrel.
Bolling, an ex-minor league third baseman who lives in central Jersey, reaches for his phone.
"Vin, it's R.B.I.," he says, using his nickname. "We have to buy 20 of crude," -- jargon for executing a trade for 20,000 barrels.
"Wow," he says after hanging up. "We're going to see an all-time record today."
He is dead on: A few hours later, crude hits $140 a barrel, continuing a dizzying ascent that has dragged down stocks and put a dent in Americans' wallets.
Oil is a complex business. It starts with exploration and drilling and leads to refiners who turn it into products such as gasoline. Then, it's pumped into trucks and shipped to the local filling station on the corner. The price is affected by countless, interlocking factors: the value of the dollar, politics, pipeline explosions, surging demands from China and the huge bets traders make every day from London to Dubai to New York.
On Thursday alone, Libya threatened to cut production from its fields, the president of OPEC estimated crude could soon reach as high as $170 per barrel, and U.S. lawmakers took steps to curb excessive speculation.
Amid all of this, one thing is certain: Oil's historic march is changing the lives of everyday people -- from traders like Bolling to 17-year-old Brittany Dippold and the car she chooses to buy and John Brackett and the number of passengers his party boat carries.
Here's the story of how the global business of oil hit home in New Jersey over the course of a single day.
3:30 A.M.: THE DAY BEGINSBolling's alarm clock goes off before dawn and, after getting ready, he drives into Manhattan to appear on the Fox Business Network's "Money for Breakfast" show, which airs at 7 a.m. These days, his schedule puts him on air more often than in the pits at the exchange, but it hasn't checked his appetite for trading.
Once one of the biggest individual traders of oil and energy futures on Nymex -- at his peak, he says, he accounted for 5 percent of the daily trading -- he has scaled back. Much of his money is now invested in shares of energy companies. A good amount of the consummate trader's money is now in cash.
"It's too dangerous to make a big bet on oil futures," says Bolling, who labored in the Pittsburgh Pirates' minor league system before a torn rotator cuff forced him to search for a new career. "If I had the same stake as I had two or three years ago, I could be wiped out in a day."
After seeing the rise in crude shortly after 9 a.m., Bolling calls his clerk at the Nymex and hedges his bets by buying 2,000 ounces of gold at $913 an ounce.
10:30 A.M.: THE LIMO DRIVERWith the average price of gas in New Jersey running $3.986, Gene Goobic no longer calculates trips in miles. Goobic, the manager of Short Hills Limousine and Van Services, uses gallons as his measuring stick.
Newark Liberty International Airport is exactly 1.4 gallons of gas away from the company's headquarters in Millburn, for example, using the service's Lincoln Navigator, he said.
On this morning, Goobic picks up a family of four in Short Hills for a trip to Newark airport. The limo service, shelling out $2,600 a week for gas, has started charging passengers a 15 percent surcharge to help cover costs.
"We have to pick up the slack," Goobic says. "If we don't, we're going to lose a lot of money. We have to stay above water."
To make matters worse, he says, a lot of his corporate clients are capping how much they're willing to pay.
"So if a guy calls me up and says my company is only letting us pay $71, sometimes we have to bite the bullet," he says. "Do we lose the $10 bucks or do we lose the customer? If a person or company uses us a lot, we'll give them a little break. I'm just hoping prices don't go up any more."
11:00 A.M.: 'BURNING GAS'Sam Abolata is on his fifth and, he says, his last Hummer.
The owner of Mia Sorella restaurant in Manville says he's now paying more for gas than the lease payment of his 2007 Hummer H2 SUT. The daily commute from his home in Flemington is easily costing him $40 a day, he says, as he prepared to open for lunch at 11 a.m.
"Even when the car's parked, it feels like it's burning gas," he says. "Maybe I should buy a gas station."
He's trying to sell the Hummer, but there aren't a lot of takers. Later in the day, a survey by the Civil Society Institute and Opinion Research notes three out of four Americans expect gas to cost $5 a gallon by Labor Day.
So what will Abolata's next vehicle be?
"Maybe a bicycle," he said.
11:10:'NO-NO'Deborah Fineman, president of Mitchell-Supreme Fuel in Orange, scans a computer screen to see the latest Nymex quotes. These days she watches prices "all day, every day."
Prices were up 14 cents -- and climbing -- an hour after OPEC president Chakib Khelil told a French TV station crude will likely rise to between $150 and $170 a barrel this summer.
"It used to be, in the summer, you'd buy futures contracts and try to establish prices for your customers," says Fineman, a lawyer who bought the company in a 1988 leveraged buyout with her husband, John Bozik. "The problem is the market has gone against historical trends."
Higher prices have put the squeeze on Mitchell-Supreme, which ships millions of gallons of fuel oil a year to homeowners and apartments in northern and central New Jersey.
Heating oil is up 55 cents a gallon this year, which translates into a 76 percent increase since January, she says. Many residential customers, whipsawed by the twin threat of recession and inflation, can't afford to fill their tanks.
"We go to fill up and the homeowner says, 'No, no,' because they figure the price is going to come down," says Fineman, adding Mitchell-Supreme's profit margins have slipped 10 percent over the past year. "So instead of going to the house twice, you have to go three, four or five times. You can't pass on the entire price increase to our customers because they can't afford to pay their bills."
NOON: ANOTHER WILD DAYBolling munches on a turkey wrap at a restaurant next door to the exchange. When someone remarks how relaxed he seems, he picks up his phone and calls his clerk: "Hi, it's R.B.I. What's crude doing? How about gold?" He nods, reassured, and says neither has moved since he bought them a few hours earlier.
Bolling learned the hard way of not paying close attention to his trades. Six years ago, he took the morning off to read to his son's preschool class. At the time, he had a big bet that natural gas prices would fall. But the night before had turned unexpectedly frigid. Gas futures were soaring.
As he sat in the class reading, Bolling was bombarded with text messages: "Where are you? You have to get here." He began to sweat, but finished reading the book. The teacher asked the class: "Any questions?" Twenty-five hands went up, he recalled, but he stayed and answered every one.
When he left, his son looked up and told him, "Dad, it was great."
By the time he got back to work, he was down $2.1 million, he recalls.
1:00 P.M.: MISSING THE TORN SHIRTBolling enters the Mercantile Exchange a little before 1 p.m., shaking hands with most of the people he passes. He never wears a tie -- not even to his own wedding -- and always wears mismatched socks, a superstition from his days playing baseball.
He began trading at the exchange in 1986 and quickly fell in love with the competitiveness, confusion and chaos of the pits.
"I love trading," he says ruefully, noting the exchange floor has changed since electronic trading began in 2006. About 80 percent of trades are made on computer screens.
"I miss it, coming out with a wet shirt, a torn shirt, but it's not there anymore," he says.
Upstairs in his 12th floor office with drop-dead views of the Statue of Liberty, Liberty State Park and Jersey City Gold Coast, he picks up the phone and rolls over some natural gas contracts for July into August so he doesn't actually have to take delivery.
"Okay, dude," he says once the deal is done. "Perfect."
2:05 P.M.: THE PARTY BOAT CAPTAINJohn Brackett said he spends two hours a day tracking commodity prices. That didn't used to be in the job description of a party boat captain.
Since 1980, he has operated the Queen Mary, a 75-foot fishing boat that sails out of Point Pleasant Beach. Brackett, who usually heads out to sea at 7:30 a.m., so customers can catch runs of bluefish and striped bass, returns to dock shortly after 2 p.m.
The diesel fuel he uses has jumped 50 percent in price, and he says he knows why.
"They are not just building buildings over in China, they are building whole cities, and because of that they need diesel to run their trucks, trains and all of their heavy equipment," he says.
To save fuel, Brackett doesn't open up the Queen Mary's engines as much as he used to. But there's another bigger problem.
"What affects me is when people are coming from Allentown, Pa., and they have to drive 120 miles," he says. "If they get 20 miles to a gallon, that means it costs them $8 more than last year to make the trip. The disposable income is not there."
2:20 P.M.: CLOSING OUT THE DAYOnly 10 minutes remain until the close of regular trading at Nymex.
Bolling has only made three trades so far, a far cry from his days in the trading pit, when he would have made more than 200 transactions by this time. These days, it's the big banks and hedge funds who move the price of energy.
"The trends are much bigger and deeper than they were before," he says.
5:00 P.M.: A RUN ON SMART CARSRay Catena's Edison dealership is packed with Mercedes, Porsches and Aston Martins. But his Smart showroom is the busiest area on the lot.
The dealership has sold more than 250 of the Mercedes-Benz-made Smart cars -- which start at around $11,600 -- since they first started arriving Jan. 18. On this day, he's got 10 left. They probably won't last the week, sales manager Leigh Farrell says.
Brittany Dippold, meanwhile, is one very happy 17-year-old.
Her father, Anthony Dippold, is closing the deal on a Smart car convertible for her.
Why the Smart car?
"Four dollars a gallon," he says. "And this car gets around 40 miles to the gallon."
The car was actually Brittany's choice. After shopping and researching, she was pushing for a used Audi TT. But when she saw the Smart car and its three-cylinder, 70 horsepower engine, she simply "fell in love with it," her father says.
The deal clincher: she's going to be paying for the gas.
POSTSCRIPTThe oil rally didn't stop Thursday.
The price of crude touched $142.99 a barrel Friday, up more than $8 in just 48 hours. Analysts' predictions of $150 -- which months ago seemed outlandish -- may be just days away.
Staff writers Sam Ali, George E. Jordan, Joseph R. Perone and Ian T. Shearn contributed to this report.