Who decides whether the investor can exercise his entitlement - he himself or the custodian?
The custodian does nothing itself other than "own" the infranstructure and oil etc in it: the Pool would be operated and managed by a "Pool Service Provider" consortium.
Only an oil user Pool member(eg a refiner) with a supply agreement with an oil supplier/distributor Pool member would have the choice of exchanging the "value unit" for actual crude oil, rather than tendering Fed dollars.
This is a disintermediated model, and delivery would not be from the Pool as intermediary, it would be from other Pool members through the Pool relationship/protocol.
Essentially Units would be oil-specific "legal tender". But a holder of Units would not be able to demand delivery in the way he could with (physically deliverable) futures contracts. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
It is already the case (certainly in the EU) that there is a requirement for a certain level of inventory to be kept, either in addition to, or instead of, government owned stocks maintained in government owned storage.
Depending on whether the market is in backwardation or not this requirement can cost refiners a lot of money.
My proposal allows them to sell this material in appropriate market conditions, and to buy it back as they see fit - and thereby make better use of the capital.
For the financial investors to whom they sell the purchase of units is to all intents and purposes the same as buying shares in an "Exchange Traded Commodity" fund. ie they get no income from their investment (as with gold) but they will profit from a price increase.
An "energy unit" is in effect an "un-geared" and "undated" forward agreement. If gearing is required, a buyer may always borrow trhe unit purchase price, or possibly use options.
There is a significant benefit in terms of costs of maintaining their position, however, because the conventional ETC model means that Investors get hit when by very significant transaction costs when the Fund vehicle "rolls over" the necessary futures contracts.
The outcome could be to free suppliers/distributors from capital constraints, and to allow them to become a pure service provider. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
