Page 25: of Marine News Magazine (March 2015)
RISK “… for so many in the so-called small to midsize end user category, hedging, which can mitigate and often eliminate exposure to price uncertainty, is a misunderstood and opaque phenomena. In reality, the complexity of the practice is overstated, though it makes sense to recruit professional advice prior to engaging in any hedge program.”
Hedging 101 Typically, buyers have a basic understanding of what
Many smaller companies assume that hedging is for the causes the price to go up and down. The commodity is “larger corporations” with vast resources and expertise. transparent so that prices can be seen at any given time.
But, that’s not necessarily true. Small to mid-size operators The contract, or product, Ultra Low Sulfur Diesel, is trad- can and do run successful hedging programs. So why don’t ed on public exchanges (CME, ICE, etc.) like the stock more players hedge fuel purchases? Does it make sense to market and this information can be easily accessed in al- have a hedging program active in your company? As it most any medium. It’s also safe to say that the supplier turns out, that depends on how you go about it. that an operator is purchasing fuel from is reacting to daily 25