The Downside of Fuel Hedging

The basic idea behind fuel hedging is to control the cost of fuel in the future. The most basic way to do that is to buy fuel in advance – lock it in for a set price and then be done with it. If the fuel price goes up, you don’t pay more. If it goes down, you don’t pay less. In the latter case, you could have bought it for less if you hadn’t hedged, but there is no additional penalty. These kind of hedges, however, can get expensive considering the volatility of fuel the last few years.

Source: The Downside of Fuel Hedging – Cranky Flier


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