An open letter to all the jokers hoping to one day get rich by trading nonexistent petroleum products and defying economic principles.
Before we dive deeper, let’s get something straight: understanding basic economic principles is crucial to sniffing out dodgy deals. Here are five fundamental concepts that, when you apply them, make it glaringly obvious why these get-rich-quick schemes trading “JP54 Jet Fuel” are utter nonsense.
- No Free Lunch Principle (Principle of Scarcity and Opportunity Cost)
Economics 101 teaches us there’s no such thing as a free lunch. The idea that you can rake in massive profits with zero risk, zero investment, and zero effort is pure fantasy. If making millions were that easy, everyone and their dog would be doing it. Wealth requires work, risk, and often, capital. Believing otherwise is not just naive; it’s delusional.
2. Risk-Return Trade-off (Principle of Risk vs. Reward)
High returns come with high risks — that’s the trade-off. The notion of guaranteed profit without any risk contradicts the very fabric of economic reality. Legitimate traders and investors understand that to achieve substantial gains, they must accept the possibility of losses. These couch traders ignore this principle entirely, which should set off alarm bells.
3. Market Efficiency (Efficient Market Hypothesis)
Financial markets are generally efficient, meaning all known information is already factored into the price of commodities. The chances of some random internet “trader” finding a mispriced opportunity in a highly scrutinized market like oil are slim to none. Professionals with years of experience and advanced algorithms struggle to beat the market consistently. So, some newbie expecting to outsmart the system is laughable.
4. Supply and Demand Dynamics (Law of Supply and Demand)
The oil industry operates on complex supply and demand dynamics influenced by global politics, production levels, and economic indicators. These wannabe traders overlook the fact that buying and selling millions of barrels of oil isn’t like haggling at a flea market. Without understanding these dynamics, they’re essentially shooting in the dark.
5. Transaction Costs and Logistics (Principle of Transaction Costs)
Trading physical commodities isn’t just about finding a buyer and a seller. It involves significant transaction costs — shipping, storage, insurance, and compliance with regulations, to name a few. These costs can erode profit margins quickly. Ignoring the logistical challenges and expenses involved is not just careless; it’s economically ignorant.
Why Understanding These Principles Matters
Grasping these economic principles isn’t just academic — it’s practical wisdom. Recognizing that there’s no free lunch, that risk correlates with return, and that markets are efficient helps you spot when a deal is, frankly, bollocks. It saves you from wasting time and resources on futile pursuits and protects you from falling prey to scams, or victim of own ignorance and cupidity. Ignorance isn’t bliss — it’s costly.
As a Trade Finance Advisory firm, when we decided to venture into internet marketing — because we were advised to “go social” — we never expected to have to build such strict funnels. We never anticipated just how problematic the online physical commodity trading space is.
It’s filled with unqualified, incompetent yet pretentious individuals aiming to get rich quick by trading millions of barrels of “JP54 Jet Fuel” from their couch, simply by finding a buyer and a seller and acting as the intermediary with no risk, zero investment, and a guaranteed profit.
How Real Traders Operate
Trading physical commodities is a full-time job, not some get-rich-quick scheme you juggle on the side. It involves handling tens of millions, if not hundreds of millions of dollars from the company’s treasury, institutional investors, and banks. Traders are qualified professionals who have often undergone extensive training — think degrees in finance, economics, or specialized fields like petroleum engineering.
Many hold certifications such as Chartered Financial Analyst (CFA) or have completed rigorous trading programs at reputable institutions. They’re not just random folks with an internet connection and a dream.
Even in those rare cases where a company’s founder is self-taught, they’re savvy enough to surround themselves with competent professionals who actually know what they’re doing.
How Traders of Nonexistent Petroleum Products Operate
As mentioned before, and in stark contrast to how real physical commodity traders operate, these so-called traders of nonexistent products (oxymoron intended) source their deals on Facebook and trade via WhatsApp.
There’s never an actual principal involved — just an endless chain of brokers, each one claiming to have a direct line to a buyer or seller.
They rely on social media platforms to find leads and use informal communication channels to negotiate multi-million-dollar deals, which is laughable at best.
Instead of engaging in thorough due diligence, market analysis, or logistical planning, they pass along dubious documents and expect instant profits. It’s a never-ending game of telephone with no substance, where everyone is “in the loop,” yet no one can prove the product even exists.
The Parties Involved in a Physical Commodity Trading Transaction
A physical commodity trading transaction is a complex operation that involves multiple parties at various stages, each playing a critical role and incurring significant costs. Let’s break down each participant, their role, the stage they’re involved in, and the associated costs over a 15-year timeline to get petroleum out of the ground.
- Exploration and Production Companies
- Role: These are the companies that explore for oil reserves and extract crude oil from the ground.
- Stage: Exploration and Development Stage (Years 0–5)
- Costs:
- Exploration: Seismic surveys, geological studies, and exploratory drilling can cost $50 million to $100 million per potential site.
- Development: Building infrastructure like drilling rigs, platforms, and wells can run into billions of dollars. For example, offshore oil rigs can cost upwards of $650 million each.
- Total Estimated Cost: Over $2 billion in the first five years.
2. Banks and Financial Institutions
- Role: Provide the necessary capital through loans and financing facilities to fund exploration and development.
- Stage: Financing Stage (Years 0–5)
- Costs:
- Interest Payments: On loans of billions, interest can accumulate to hundreds of millions of dollars over the loan period.
- Fees: Arrangement fees and commitment fees can add another $10 million to $50 million.
- Total Estimated Cost: Approximately $200 million over the initial years.
3. Boutique Advisors and Non-Bank Financial Institutions (NBFIs)
- Role: Offer specialized structured trade finance services, help in deal structuring, and connect companies with potential investors.
- Stage: Financing and Structuring Stage (Years 0–5)
- Costs:
- Advisory Fees: Typically range from 1% to 3% of the total deal size, which could be $20 million to $60 million.
- Due Diligence Costs: Additional $5 million to $10 million.
- Total Estimated Cost: Around $30 million to $70 million.
4. Off-Take Agreements
- Role: Contracts with buyers who agree to purchase the oil once it’s produced, providing assurance to financiers.
- Stage: Contracting Stage (Years 3–5)
- Costs:
- Legal and Negotiation Fees: Drafting and negotiating contracts can cost $1 million to $5 million.
- Price Discounts: Sometimes agreeing to a lower price as part of the contract terms, impacting revenue.
- Total Estimated Cost: Potential revenue impact of tens of millions over the agreement’s life.
5. Credit Rating Agencies
- Role: Assess the creditworthiness of the company’s debt instruments, which is crucial for attracting investors.
- Stage: Debt Issuance Stage (Years 2–5)
- Costs:
- Rating Fees: Can range from $500,000 to $1 million per rating.
- Annual Surveillance Fees: Ongoing fees of $100,000 to $200,000 per year.
- Total Estimated Cost: Approximately $2 million over 15 years.
6. Legal Counsel
- Role: Handle all legal aspects, including contracts, regulatory compliance, and dispute resolution.
- Stage: Throughout All Stages (Years 0–15)
- Costs:
- Legal Fees: High-caliber law firms may charge $500 to $1,000 per hour.
- Total Estimated Cost: Legal expenses can accumulate to $50 million to $100 million over 15 years.
7. Analysts and Consultants
- Role: Provide financial modeling, risk assessment, and market analysis.
- Stage: Throughout All Stages (Years 0–15)
- Costs:
- Salaries and Fees: Annual salaries for in-house analysts plus consulting fees can total $5 million per year.
- Total Estimated Cost: Around $75 million over 15 years.
8. Logistics Companies
- Role: Manage the transportation of crude oil from extraction sites to refineries or export terminals.
- Stage: Production and Delivery Stage (Years 5–15)
- Costs:
- Transportation Costs: Shipping crude oil can cost $2 to $4 per barrel.
- Total Estimated Cost: For transporting 50 million barrels annually, costs would be $100 million to $200 million per year.
- Total Over 10 Years: Approximately $1 billion to $2 billion.
9. Inspection and Certification Companies
- Role: Verify the quantity and quality of the oil at various stages.
- Stage: Production and Delivery Stage (Years 5–15)
- Costs:
- Inspection Fees: Around $1,000 to $2,000 per inspection.
- Total Estimated Cost: With frequent inspections, costs can total $10 million over 10 years.
10. Regulatory Bodies and Compliance
- Role: Ensure adherence to environmental regulations, safety standards, and international laws.
- Stage: Throughout All Stages (Years 0–15)
- Costs:
- Compliance Costs: Implementing and maintaining compliance can cost $10 million annually.
- Penalties and Fines: Non-compliance can result in hefty fines, but proactive compliance seeks to avoid this.
- Total Estimated Cost: Approximately $150 million over 15 years.
11. Insurance Companies
- Role: Provide coverage for assets, liability, and business interruption.
- Stage: Throughout All Stages (Years 0–15)
- Costs:
- Premiums: Annual insurance premiums can be $20 million to $30 million.
- Total Estimated Cost: Around $300 million to $450 million over 15 years.
Total Estimated Costs Over 15 Years
Adding up all these costs, we arrive at a staggering figure:
- Exploration and Production: ~$2 billion
- Financing Costs: ~$200 million
- Advisory and Due Diligence: ~$70 million
- Off-Take Agreements Impact: Tens of millions (variable)
- Credit Rating Fees: ~$2 million
- Legal Fees: ~$75 million
- Analysts and Consultants: ~$75 million
- Logistics: ~$1.5 billion
- Inspection Fees: ~$10 million
- Compliance Costs: ~$150 million
- Insurance Premiums: ~$375 million
Grand Total: Approximately $4.5 billion over 15 years (excluding variable revenue impacts)
Why It’s Pre-Financed
Given these astronomical costs, it’s evident why the entire operation needs to be pre-financed. Exploration and production companies simply don’t have billions in cash lying around to fund these projects upfront. They rely on a combination of debt financing, equity investment, and off-take agreements to secure the necessary capital.
Banks and investors require assurance of future returns, which is why securing off-take agreements and credit ratings is crucial. The pre-financing structure spreads the financial risk among various stakeholders and ensures that the project has the liquidity needed at each stage.
All these moving parts and the colossal costs at every stage just highlight how mind-blowingly complex trading physical commodities like petroleum really is. Every single participant is vital, and skipping even one step isn’t an option.
This meticulous orchestration is a far cry from the fantasy world of internet “traders” — those unqualified, pretentious bozos who think they can broker massive oil deals from their couches without any of this groundwork.
The reality is, without serious investment, professional expertise, and a solid network of industry insiders, you’re not trading anything — let alone millions of barrels of “JP54 Jet Fuel.”
The Braindead Joker-Broker Logic
The Joker-Broker Logic
According to these self-proclaimed traders, there’s an endless supply of fuel barrels just waiting for them to pick up — without any financial risk — and resell for a guaranteed profit. Risk-free arbitrage! Apparently, the refinery owner and everyone else in the market have been eagerly waiting for them to show up via a Facebook group to earn the 20% profit they’re so entitled to, since the seller is offering a 25% discount, along with a 5% commission for intermediaries.
Sounds absurd, right? But believe it or not, that’s the nature of the enquiries we receive daily from these Joker-Brokers hoping to get rich quick trading M100, ICUMSA45, JP54, D2, EN590, Crude Oil, Gold Bars — you name it. Even Bitcoin OTC at a 30% discount is a thing now.
So Are All These Deals Fake?
Yes — all of them, without exception, if you haven’t got the gist of it by now. Every single one of these so-called “opportunities” is complete bollocks.
The idea that you can swoop in, with zero experience, zero capital, and zero risk, to broker massive deals involving millions of barrels of oil at ridiculous discounts is pure fantasy.
These deals are peddled by clueless individuals who have no understanding of how the real world works. They’re chasing illusions, wasting everyone’s time, and clogging up inboxes with their nonsensical proposals.
All the documents you receive in these so-called deals are fabricated — from the refinery name to the owner’s identity — nothing can ever be verified. The SGS reports, the Q88 forms, the transport company details — all bogus.
And let’s not even start on the LOIs (Letters of Intent), ICPOs (Irrevocable Corporate Purchase Orders), and whatever other documents these broker jokers employ.
There’s a document forger with a premium MarineTraffic account allowing him to track tankers, a few Skype numbers, and some call center employees ready to take your calls and collect six to seven figures in advance for nonexistent oil. Everyone else involved is just wasting time chasing shadows.
If you’re still entertaining the notion that these deals might be legit, it’s time for a reality check.
The Final Word
For us, this whole foray into social media has been an interesting experiment. We’ve had to create filters to screen out these bozos who can’t even afford to pay $200 for a consultation, yet they claim they need financing for a $50 million commodity trade.
They can’t even shell out for simple supply chain due diligence to find out if their deal is legit, let alone pay for advisory services to properly structure a transaction.
Sure, they want “no upfront fee,” but they’re wasting years chasing illusions. We’ve seen broker jokers spending over 15 years trying to close a petroleum deal, putting their lives on hold, refusing to educate themselves or pay for the right counseling. Don’t be one of those.
You’ll find countless successful commodity traders who fit the first profile we discussed — seasoned professionals with a solid track record. But you’ll never find one of these Joker Brokers, or their fictitious suppliers or buyers, ever showing proof of a successful transaction.
They love to hide behind the veil of secrecy and confidentiality, paradoxically in an industry where transparency is everything. Real traders understand that while certain deal specifics are confidential, demonstrating credibility isn’t.
They’re willing to provide verifiable references, show compliance with regulations, and share their history of successful trades.
The Joker Brokers, on the other hand, offer nothing but excuses and smoke screens. They cling to “confidentiality” as a shield to mask the fact that they have zero evidence of any legitimate dealings. Don’t be fooled — transparency isn’t just a nice-to-have in this industry; it’s a necessity.
