A. LACK OF KNOWLEDGE AND PROPER INFORMATION AMONG INTERMEDIARIES
Most experts and keen analysts of the industry often lament and bemoan one nagging fundamental shortcoming of the modern Internet-era class of brokers, agents and other intermediaries – namely, that, as a class, they tend to be overly handicapped and plagued by a general lack of education, training, knowledge and proper information concerning the true nature and workings of international trade, and of its fundamentals and basic procedures.
Mr. R. Ambardar, a broker experienced for over 10 years in international market development and advisory services who has personally closed several petroleum deals, calls “lack of experience and knowledge” one of the principal primary reasons why many brokers and facilitators fail in crude oil endeavors and never close any deals. “Many people are attracted into this business because of [the tales they hear about the] kind of money one can earn on account of successful deals,” Ambardar asserts. “Many agents fail, [however], to understand that requirements to succeed in this business are very demanding, [and that] only those who have years of hands-on experience and thorough knowledge of the industry can strive to do well as middle-men.”
Echoing what almost every other respected expert in the field emphatically asserts, Ambardar adds, that “To become a ‘Facilitator’ in oil business,… what you actually need is right knowledge and expertise [since this is what will help] you hook up genuine buyers and sellers. One should be in the industry for long to have acquired knowledge related to the dynamics of this business.”
In the same vein, Davide Papa, the co-author with Lona Elliot of “International Trade & the Successful Intermediary,” one of the most prominent experts in the field today on the basic methodology and procedures of international trading by brokers and intermediaries, asserts that,
“Without the requisite knowledge of the correct trading procedures, you [the broker or agent/intermediary] are simply wasting your time by attempting to trade. The vast majority of traders you will meet on the Internet don’t know how to close a deal. Most don’t even know how to start a deal correctly, let alone bringing one to a successful conclusion.”
Consequently, says Mr. Papa, “Anyone attempting to do business with these types of intermediaries [or with their procedures] will also be unable to close a deal or collect a cent in commission, no matter how long they trade for or how hard they try.”
What Misguided Agents and Intermediaries erroneously think is “trading”
Yet, as a factual matter, most (in deed, just about ALL) brokers and intermediaries that one meets on the Internet who claim they have oil to sell, or who, for example, flood my Consultancy Office with “offers” and “deals” by the dozens every hour of the day each day, haven’t got even the foggiest clue of what is actually involved in proper trading, or how it works or is done. Almost to a man or woman, they essentially think that all there is to oil “trading,” is basically the accumulation of any number of some copied generic documents – ‘SPAs,’ ‘LOI,’ ‘FCO,’ ‘ICPO,’ and what have you – with almost none ever verified, and passing them around on the Internet to potential buyers or their agents, asking them to “just sign,” “just sign”! In deed, what is even worse, they hardly ever have the foggiest idea of even what their PROPER function and duty is, or should be, as an intermediary in the modern Internet era of TOO MUCH information and data, but TOO LITTLE quality or genuine information and data!
B. A MAJOR WAY IN WHICH THIS LACK OF KNOWLEDGE BY THE INTERMEDIARY IS MANIFESTED
Quite oddly enough, one of the major but most fundamental ways in which this woeful pervasive lack of knowledge and information of the fundamentals and proper procedures manifests itself on the part of the intermediaries, is the awesome lack of knowledge among them concerning even the basic purpose and proper function or duty which the modern intermediary is supposed to serve for the oil trader and in the marketplace. Most Internet intermediaries are NOT even aware of what EXACTLY that is!
THE TRADITIONAL ROLE & FUNCTION OF THE INTERMEDIARY
First, let us start with looking at the “traditional” role and function of the intermediary in the marketplace. This description of the duties and functions of a facilitator given by Sam Nelson, the author of a noted primer on oil trading that’s commonly used by many brokers and agents, best represents, perhaps, the conception of the traditional primary function of the intermediary in oil deals:
“Facilitating a business [by a Facilitator] is an act of arranging business activities as contained in a contract and bringing two parties into an agreement towards the smooth implementation of a contract as defined by the contract procedures… The facilitator is the individual, or group of people, arranging business activities as contained in a contract and bringing two parties into a mutual agreement towards the smooth implementation of a contract as defined in the procedures of the contract… There are people who work as facilitators in different kinds of business transactions, for example, ‘Currency trading.’ ”
Nelson adds that, as a Facilitator on the seller’s side, for example, “the seller depends on you to find a reputable buyer. You, as the facilitator, become the hub for these deals. Honesty is required on your part. You can facilitate a deal as a buyer or seller’s facilitator but I will advise you not to be on both sides at the same time for the same deal. That will be an absolute greed.”
Robert McAngus, the Chairman and CEO of the McAngus Group, a Marbella, Spain-based global conglomerate actively engaged in the business of primary commodities, including oil products, through its network of offices and partners in Africa, Europe, the Far and Middle East, and the Americas, gives his own description of the usual traditional role of the intermediary, this way: “a broker’s entire job is to help a petroleum company’s trading department find or sell oil and related products so that he will receive a commission when the deal comes together.”
In other words, by traditional standards, the primary role and function of the intermediary in the so-called “secondary” market petroleum trading operations, is simply the “sourcing” function – that is, the job of finding the suppliers of the product and matching them with intending buyers, in return for which the sourcing broker or agent will receive commission payments for successfully completed deals.
THE NEW PARADIGM SHIFT IN THE ROLE & FUNCTION OF THE INTERMEDIARY
But here’s the central point to be made here, however. And that is this: That this old, “traditional” role and function of the broker or the intermediary in crude oil and petroleum products deals have changed in this current era of the Internet – and in a big, big and drastic way! And anyone who operates in the oil trade industry today as a broker, agent or other intermediary without knowing, or understanding or recognizing this critical modern-era reality, or who continues to operate as though, as in the past, all that is required of him is just to find a seller and “match” him with a buyer, or vice versa, totally misses the mark as to his proper place or function today in the marketplace, or his true market value or worth.
In deed, in this writer’s studied assessment, much of the problems and negative aspects (the so-called ‘dark side’) of the international commodities trading business that have often been primarily attributed to the role and involvement of the modern intermediaries’ in the business – the inability of most to successfully close deals or to make a commission, the involvement of many in scams and fake offers, etc – can be directly traced to this factor alone: namely, the failure on the part of the intermediary, whether knowingly or otherwise, to modify and adjust his business tactics and method of operation to align with this new “paradigm” shift of the current Internet era market place.
I’LL SUM IT UP SIMPLY THIS WAY, IN A NUTSHELL: True, in the past, BEFORE the present-day business ethics of the computer/Internet-era, what the average traders viewed to be the more important need and service from an intermediary – and one about which, therefore, the trader primarily sought and employed the services of the intermediary for – was primarily to obtain trade leads and contact sources for business prospects. But in this present post-Internet era, however, what the average trader now primarily wants and needs from the broker or intermediary, is not so much the trade leads or contact sources. But, rather, he primarily needs and wants the broker/agent intermediary to get him trade leads or contact sources and information that are duly verified or verifiable. Or, to put it another way, the trader’s primary need and most vital interest in an intermediary today, is for the broker and intermediary to aid and assist him in verifying and doing DUE DILIGENCE on the trade leads and opportunities or contact sources that are now generally available in superabundance, whether online or offline.
Jeffrey P. Graham, President of JPG Consulting, a Philadelphia-based international business consulting and research firm, makes that point rather quite clearly in his classic 1997 essay titled, “Evaluating Trade Leads.” Graham, who was one of the first to make that profound observation, states that with the coming of the Internet, the major issue and concern of international traders significantly became, NOT having too few or an insufficient number of trade leads on the buying or selling of a particular product or service, but having too many and too much of it. And that with that profound change, the central issue for the world traders became the ability and facility of traders – and the brokers, agents and intermediaries who work for them – to carry out good DUE DILIGENCE on the trade leads presented by or about a company or product, and being able to do competent evaluation on such company or product as to its genuineness and quality.
Thirty years ago, Graham says (meaning before oil the Internet became a factor), there were far fewer companies doing business as traders and intermediaries, and, secondly, the task of finding out how credible a company was, was a simple matter of just checking the telex address and obtaining some bank references on the company.
However, Graham adds, all that has drastically changed – thanks, or no thanks, to the Internet!
Graham sums up this view this way:
“Until very recently, gaining access to reliable sources of trade leads was a very expensive and time-consuming proposition for many small and medium sized companies (SME’s). In the United States, [for example], the Department of Commerce was the sole purveyor of trade leads… companies paid a monthly subscription fee then in order to gain access to what was available, whether it was appropriate or not. [However], with the proliferation of trade lead sources available on the World Wide Web (WWW), access to trade leads is no longer a problem. What has not changed, however, is the time involved in handling trade leads.