MGRM’s Marketing Program
In 1992, MGRM began implementing an aggressive marketing program in
which it offered long-term price guarantees on deliveries of gasoline, heating
oil, and diesel fuels for up to five or ten years. This program included several
novel contracts, two of which are relevant to this study. The first was a “firm-
fixed” program, under which a customer agreed to fixed monthly deliveries
at fixed prices. The second, known as the “firm-flexible” contract, specified a
fixed price and total volume of future deliveries but gave the customer some
flexibility to set the delivery schedule. Under the second program, a customer
could request 20 percent of its contracted volume for any one year with 45
days’ notice. By September 1993, MGRM had committed to sell forward the
equivalent of over 150 million barrels of oil for delivery at fixed prices, with
most contracts for terms of ten years