Oil price hedging...
10-11-2008, 05:58 PM
#1
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Oil price hedging...
I flew with a captain who said that many years ago UPS used to hedge their fuel all the time. Why is it that neither UPS nor Fedex do it today?
They might hedge some but it’s a very small percentage of their yearly usage and I figured with the cash reserves UPS and Fedex have it would be a priority for them both. Any ideas why they choose not to?
Also, do you think the pax airlines are hedging now that the oil prices are dropping?
Ps. I meant to post it in the cargo forum, maybe a moderator can move my post?
They might hedge some but it’s a very small percentage of their yearly usage and I figured with the cash reserves UPS and Fedex have it would be a priority for them both. Any ideas why they choose not to?
Also, do you think the pax airlines are hedging now that the oil prices are dropping?
Ps. I meant to post it in the cargo forum, maybe a moderator can move my post?
10-11-2008, 06:01 PM
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10-11-2008, 07:52 PM
#5
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On the surface, fuel hedging seems like a no-brainer but it's always a gamble. There's also a few different types of hedges available and each has different associated costs.
In today's global economy, firms do a lot of hedging and not just for fuel either. International firms hedge against future (foreign) exchange rates. Like fuel hedges, this type of hedging is a huge gamble and you need capital to hedge in the first place.
Once hedged, a firm is commited and their fortune could go either way. I think the airlines that can afford to may just hold out a little longer before hedging a large percentage of their fuel requirement.
If America stops driving fuel inefficient cars, the problem of high oil prices will go away.
AL
In today's global economy, firms do a lot of hedging and not just for fuel either. International firms hedge against future (foreign) exchange rates. Like fuel hedges, this type of hedging is a huge gamble and you need capital to hedge in the first place.
Once hedged, a firm is commited and their fortune could go either way. I think the airlines that can afford to may just hold out a little longer before hedging a large percentage of their fuel requirement.
If America stops driving fuel inefficient cars, the problem of high oil prices will go away.
AL
10-11-2008, 08:01 PM
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I read that even if we all start driving hybrids, oil prices will be right back to where they are in seven years.
Also, I really find it hard to believe that anyone who has seen the wide-reaching effects that high oil prices have had on every facet of our economy can think that SUVs or other "fuel inefficient cars" are the sole cause of high oil prices.
Saying that knowing what we're going through is just plain silly.
10-12-2008, 06:47 AM
#8
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No it won't.
I read that even if we all start driving hybrids, oil prices will be right back to where they are in seven years.
Also, I really find it hard to believe that anyone who has seen the wide-reaching effects that high oil prices have had on every facet of our economy can think that SUVs or other "fuel inefficient cars" are the sole cause of high oil prices.
Saying that knowing what we're going through is just plain silly.
I read that even if we all start driving hybrids, oil prices will be right back to where they are in seven years.
Also, I really find it hard to believe that anyone who has seen the wide-reaching effects that high oil prices have had on every facet of our economy can think that SUVs or other "fuel inefficient cars" are the sole cause of high oil prices.
Saying that knowing what we're going through is just plain silly.
Silly Sir?
Who mentioned "sole" cause? There are many contributers to high oil prices.
Here's some basic macroeconomics.
America consumes almost 25% of the world's oil but produces less than 5%. The US also produces VERY inefficent automobiles!
Now, guess what happens to World demand if you have such a consumer reduce its own demand. Bingo! You GREATLY reduce WORLD demand!
What happens when you GREATLY reduce world demand ? Assuming no reduction in supply, the price of oil drops!
I had to buy a German imported car because I can't find anything comparable in the US. Not only is it a great performer. It's great on gas!
Meanwhile, my nabor drives a Ford F150 for personal transportation only, does about the same weekly mileage as me, and uses 3 times the gas I do.
You can speculate all you like about where oil prices will be in years to come. It's pure speculation.
The US needlessly wastes oil on its roads every day and that's pure fact!
AL
10-12-2008, 07:06 AM
#9
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Silly Sir?
Who mentioned "sole" cause? There are many contributers to high oil prices.
Here's some basic macroeconomics.
America consumes almost 25% of the world's oil but produces less than 5%. The US also produces VERY inefficent automobiles!
Now, guess what happens to World demand if you have such a consumer reduce its own demand. Bingo! You GREATLY reduce WORLD demand!
What happens when you GREATLY reduce world demand ? Assuming no reduction in supply, the price of oil drops!
I had to buy a German imported car because I can't find anything comparable in the US. Not only is it a great performer. It's great on gas!
Meanwhile, my nabor drives a Ford F150 for personal transportation only, does about the same weekly mileage as me, and uses 3 times the gas I do.
You can speculate all you like about where oil prices will be in years to come. It's pure speculation.
The US needlessly wastes oil on its roads every day and that's pure fact!
AL
Who mentioned "sole" cause? There are many contributers to high oil prices.
Here's some basic macroeconomics.
America consumes almost 25% of the world's oil but produces less than 5%. The US also produces VERY inefficent automobiles!
Now, guess what happens to World demand if you have such a consumer reduce its own demand. Bingo! You GREATLY reduce WORLD demand!
What happens when you GREATLY reduce world demand ? Assuming no reduction in supply, the price of oil drops!
I had to buy a German imported car because I can't find anything comparable in the US. Not only is it a great performer. It's great on gas!
Meanwhile, my nabor drives a Ford F150 for personal transportation only, does about the same weekly mileage as me, and uses 3 times the gas I do.
You can speculate all you like about where oil prices will be in years to come. It's pure speculation.
The US needlessly wastes oil on its roads every day and that's pure fact!
AL
Do we need to parse your sentence for you? It means you think the problem is my Pick up truck.
The reason america uses 25% of the worlds oil is we are the most productive country on the earth.
The reason we only produces 5% of the worlds supply is because we are the only country in the world that places our largest known reserves off limits. It seems some aren't happy that I drive a pick up truck; so they will do what ever it takes to drive the price up to force the "green" choice.
Here is some redneck economics for you: The main reason the price has dropped to $80 a barrel is world demand will be reduced because of the economic slow down. Not because americans will start driving more efficient cars.
Last edited by FDXLAG; 10-12-2008 at 07:29 AM.
10-12-2008, 08:13 AM
#10
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Silly Sir?
Who mentioned "sole" cause? There are many contributers to high oil prices.
Here's some basic macroeconomics.
America consumes almost 25% of the world's oil but produces less than 5%. The US also produces VERY inefficent automobiles!
Now, guess what happens to World demand if you have such a consumer reduce its own demand. Bingo! You GREATLY reduce WORLD demand!
What happens when you GREATLY reduce world demand ? Assuming no reduction in supply, the price of oil drops!
I had to buy a German imported car because I can't find anything comparable in the US. Not only is it a great performer. It's great on gas!
Meanwhile, my nabor drives a Ford F150 for personal transportation only, does about the same weekly mileage as me, and uses 3 times the gas I do.
You can speculate all you like about where oil prices will be in years to come. It's pure speculation.
The US needlessly wastes oil on its roads every day and that's pure fact!
AL
Who mentioned "sole" cause? There are many contributers to high oil prices.
Here's some basic macroeconomics.
America consumes almost 25% of the world's oil but produces less than 5%. The US also produces VERY inefficent automobiles!
Now, guess what happens to World demand if you have such a consumer reduce its own demand. Bingo! You GREATLY reduce WORLD demand!
What happens when you GREATLY reduce world demand ? Assuming no reduction in supply, the price of oil drops!
I had to buy a German imported car because I can't find anything comparable in the US. Not only is it a great performer. It's great on gas!
Meanwhile, my nabor drives a Ford F150 for personal transportation only, does about the same weekly mileage as me, and uses 3 times the gas I do.
You can speculate all you like about where oil prices will be in years to come. It's pure speculation.
The US needlessly wastes oil on its roads every day and that's pure fact!
AL
So, I've driven a pickup truck for a while and I get around 20 mpg consistently (and that was with a Dodge 2500)... so what German car do you have that gets 60 mpg??
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