Fuel Price Risk Management

What is Fuel Price Risk Management?

Risk management is an integral part of any business. Yet, managing risk is essential in the oil and gas industry.

Fuel companies face different challenges, such as offering price stability and protecting margins, protecting cash flow against price fluctuations, budgeting decisions, project planning, and securing supply at a predictable price. Fuel price risk management is a tool that helps companies address fuel price volatility, price swings, and other issues impacting the dynamic fuel industry. As a continual cyclic process, fuel price risk management includes risk assessment, decision-making, and risk controls implementation.

Risk Management

Protec Fuel’s Approach to Fuel Price Risk Management

Customers have different goals and business strategies. Some companies want to provide more effective and competitive budget estimates while staying safe from fuel price risks. Others have enhanced the overall fuel margins by locking specific baseline price supply options. The rest prefer to avoid ups and downs and have competitive fuel cost that is more predictable.

Protec Fuel can assist them with fixed fuel price plans and other custom-tailored solutions. Our mission is to provide additional revenue to our clients by helping you to manage the price swings or to take advantage of them.

Factors Impacting Fuel Prices

Oil and gas companies deal with many risks affecting operational aspects of their business and, most importantly, fuel prices. The most common are the following:

How Do Fuel Price Fluctuations Affect Businesses?

Fuel price fluctuations can affect businesses in various ways, depending on how companies organize their supply.

Companies that store fuel in large underground reservoirs react differently to price. Price swings can have positive and negative impacts. If the company can quickly purchase and deliver the gas (replacing it with a new delivery), price swings can bring significant profits. The same goes for companies with smaller tanks (retail stations). On the other hand, companies that hold a massive supply of diesel or gas (without the ability to turn over the fuel swiftly) suffer negative consequences of price volatility.

Why is Fuel Price Risk Management Important?

Fuel price risk management helps companies predict risks, analyze them, and assess their impact on their business. Determining the risk sources enables measuring its scale and predicting the chances of its recurrence. Being able to anticipate common risks allows companies to calculate potential losses and prepare to avoid or minimize them. Finally, knowing the potential dangers in advance means fuel companies can select the best methods on time and face the risk appropriately.

Protec Fuel's E85

Protec Fuel’s Solutions

Our dedication to helping you avoid or adjust to fuel price volatility has motivated us to design unique risk management solutions such as fixed-price plans, price caps and collars, and custom-tailored programs.

1. Fixed-Price Plans

Fixed-price plans are an intelligent way to freeze fuel costs for a specific period, protecting yourself from fuel market volatility and price swings. By choosing fixed-price tariffs, companies limit the fuel price per unit, meaning their overall costs can vary depending on the quantity of fuel they use. The key is that the price per unit will not change, regardless of the market changes.

Protec Fuel can provide several options. We can handle the distribution for you physically or handle the supply financially. Construction companies can reap significant benefits from a fixed price on fuel (gas or diesel), helping them maintain profitability on construction or road

projects without having to worry about fuel prices impacting the project’s profits.

For companies that perform long-term projects involving substantial fuel consumption, locking in a fixed cost on the fuel is essential. If diesel or gas is not the sole component of your business project, having the option to choose a fixed price for a pre-determined timeframe can make a significant difference between being profitable and suffering from market volatility.

2. Price Caps and Collars

Fuel price volatility poses significant challenges for businesses operating many different vehicles. Transportation companies experience regular price swings, negatively affecting their everyday operations. Having the ability to limit fuel prices within specific limits proves vital for companies managing fleets of vehicles.

Protec Fuel can set fuel price caps and collars, limiting the price from falling below a specific bottom level (floor) or exceeding the ceiling. Using our in-depth financial and commodity exchange knowledge, we can utilize appropriate hedging instruments to provide you with the fuel price range that best fits your needs.

3. Tailored Solutions

As a wholesale supplier of fuels to private industry and government-related entities, Protec Fuel specializes in serving the wholesale commercial markets. We are not your retail competitor – think of us as your ally in supply. Therefore, we are willing to go the extra mile in providing you with more speculative (custom-tailored) programs to strengthen your retail position so you can focus on customers rather than the markets.

Why Choose Protec Fuel for Fuel Risk Management?

Protec Fuel Management, LLC is a Florida ethanol fuel marketing and solutions company. We pride ourselves on more than two decades of experience providing our clients with unique services such as turnkey ethanol solutions, fuel risk management, supply and logistics, and profit strategies.

Our experts combine technical and financial knowledge and are committed to satisfying your needs by tailoring unique solutions for each client.

To protect your business from fuel price volatility, price swings, and other fuel market disruptions, choose Protec Fuel as your expert risk management partner.

Please call us today at 561-392-3667 or email us at [email protected] to see how we can help.

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