Fuel price risk management

Fuel price risk management, a specialization of both financial risk management and oil price analysis and similar to conventional risk management practice, is a continual cyclic process that includes risk assessment, risk decision making and the implementation of risk controls. It focuses primarily on when and how an organization can best hedge against exposure to fuel price volatility. It is generally referred to as "bunker hedging" in marine and shipping contexts and "fuel hedging" in aviation and trucking contexts.

Providers of fuel price risk management services

Fuel price risk management services are predominantly provided by specialist teams within fuel management companies, oil companies, financial institutions, utilities and trading companies. Examples include:

The fuel price risk management process

Similar to conventional risk management practice, fuel price risk management is considered a continual cyclic process that includes the following:
An alternative to the above described process is the following:

Real investments as risk reduction

Energy efficiency measures can be seen as real capital investments that, in addition to reducing fuel costs, reduce exposure fuel price risk. As less fuel is consumed, a smaller cost component is susceptible to fluctuations in fuel prices. The value of this risk reduction can be calculated using the Tuominen-Seppänen method and its value has been shown to be approximately 10 % compared to direct cost savings for a typical energy efficient building.