Bunker Fuel hedging

Bunker hedging is a contraction of the traditional financial risk management and fuel price analysis. Thus, fuel price risk management is used to reduce or eliminate a company's exposure to fluctuating bunker costs.

This form of risk management is continuously processing, including the traditional tasks of risk management: Risk assessment; the development of a strategy and action plan; and strategy implementation. The prolonging of fuel price analysis in bunker hedging mainly contributes with price forecasts. By using industry specific tools and strategies it is possible to fix or cap a bunker price at a certain level and period of time enabling the development of a bunker hedging strategy decreasing the pressure on your company’s bunker budget.

Bunker hedging - why use it?

If your company is exposed to bunker price fluctuations, bunker fuel hedging is a tool that can help eliminate the risk of your bunker budget getting out of control. Here are a few examples of why to hedge:

  • Bunker prices fluctuate - the oil market is extremely volatile
  • Bunker oil expenses represent a large fraction of the operational costs
  • Insurance against price fluctuations
  • Pro-active strategy for budget protection

The bunker fuel hedging process

The fuel price risk management includes the following actions:

Research

We establish your company’s position within both the internal and external context. The current and future business environment within the industry is investigated to lay out the competitive context. Further, the objectives and needs of your company must be emphasized. Subsequently, the budget and the required fuel consumption are established. 

Risk assessment

This phase includes calculations of fuel costs, and consequently, risk identification. The identification of risks leads to an identification of the organization’s attitude to risks which will influence the strategy development phase.

Strategy development

We build scenarios of different bunker fuel hedging strategies based on the former research phases. The strategies are evaluated to fit the objectives and needs of your organization with the future context of the business fuel industry.

Strategy implementation

The strategy implementation phase includes risk treatment. Specific actions are taken towards the risks identified in earlier phases.

Evaluation and review

Continuous evaluation is essential to evaluate performance. We continuously improve the performance parameters for the next bunker fuel hedging process.

How to get started on bunker hedging?

You and Global in collaboration work out a hedging strategy and evaluate which hedging tools could be of advantage to you - we customize the tools to fit your specific needs.

Step 1: Identifying goals

Your oil risk manager will start by working with you to gain an understanding of where you are exposed to fuel price fluctuations.

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