Thursday, October 19th 2017

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What is fuel hedging?

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27th Nov 2009 by Tobias John Sterling

In the world of business, 'hedging' refers to doing something to reduce one's exposure to a potential future risk. For example, a company that imports goods from another country in order to sell them locally might hedge against the risk of their currency falling against the foreign currency (thus making imports more expensive) by buying a large amount of the foreign currency at current rates. Fuel hedging is committing to buying a certain amount of fuel at a certain time (or times) in the future, at the current price. This protects against the possibility of a rise in the price of fuel in the future, though of course there is a risk: that the price of fuel will fall, rather than rising. If this happens then the result of the hedge is that fuel must be bought at more than its market rate.

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26th Nov 2009 In Budgeting 1 Answers | 483 Views
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