Guidebook for Evaluating Fuel Purchasing Strategies for Public Transit Agencies (2012) / Chapter Skim
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Pages 7-9
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7 The Basics of Commodity Price Risk Management Commodity price risk management strategies are designed to mitigate fuel price volatility caused by fluctuations in global oil markets and regional refining markets. This price volatility is caused by global and regional supply and demand factors, as well as other factors that are beyond the control of the consumer.
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From page 8... ...
8 Guidebook for evaluating Fuel Purchasing Strategies for Public transit Agencies which fixes the price of fuel today for the delivery in the future, or cap-price protection, which sets a cap or ceiling on upward price movements in exchange for a premium payment. The choice of hedging level determines the percentage of the agency's fuel consumption that will be protected from price increases.
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From page 9... ...
the Basics of commodity Price Risk Management 9 from fuel suppliers via cap-price supply contracts. For those with smaller fuel purchase volumes, a number of web-based programs have been developed to provide cap-price protection.
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