MGRM developed several novel contract programs. First, it offered a “firm-fixed”
program under which the customer would agree to a fixed monthly delivery of oil products at a
set price. (102 million barrels of oil products were obligated under this program by September
1993). Second, it offered a “firm-flexible” contracts under which the customers were given
extensive rights to set the delivery schedule for up to 20% of its needs in any year, besides the
fixed price commitments. (A total of 52 million barrels were contracted under this program).
Third, it offered a “guaranteed margin” contracts under which it agreed to make deliveries at a
price that would assure the independent operator a fixed margin relative to the retail price offered
by its geographical competitors. The contracts could be extended annually for a defined period
and at MGRM’s discretion. This means they were not firm obligations. (By September 1993, a
total of 54 million barrels were committed under this program.) It is the first two programs
involving 154 million barrels of obligations for periods up to ten years that constituted MGRM’s
designated short position in oil.