Introduction

Vincent Kaminski

When we made the third edition of Managing Energy Price Risk available to our readers the energy trading business was emerging from a cyclical downturn that had begun after the bankruptcy of Enron and departure from the scene of a number of merchant energy firms. The market implosion of 2002–3 was preceded by the “best of times and the worst of times” era of the 1990s. This was the period of radical re-organisation of energy markets, deregulation combined with the introduction of new business models, and an explosion of creativity in all the areas of energy trading and risk management. Those were also the days marked by many market abuses, with many firms throwing caution to the wind and accumulating unsustainable levels of debt and trading positions out of proportion with their balance-sheet quality and capitalisation levels.

This last cycle (corresponding roughly to the years 1990–2003) is now being repeated, with a new set of market players and under different economic conditions. The commodity markets went in the last decade through a period of very fast growth, fuelled primarily by the developments in emerging economies (primarily China and other BRIC countries), and by the