Energy Hedging & Risk Management Case Studies

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Cruise Line Implements Successful Bunker Fuel Hedging Program

Client

A privately held, cruise line

The Situation

The company's board of directors engaged us to assist them to develop, implement and manage a bunker fuel hedging program.  The company’s board of directors declared this a critical project as bunker fuel is the company's largest, variable cost and their previous attempts to hedge their fuel price exposure were unsuccessful.

Our Role

  • Conducted several meetings during which the board of directors and senior management were interviewed about their fuel hedging goals and objectives as well as the capabilities of their existing staff and systems
  • Developed an official fuel hedging policy as well as an accompanying procedural manual
  • Performed quantitative and qualitative analysis of the company’s global bunker fuel exposure including price, basis, credit and operational risks
  • Facilitated new relationships with several hedging counter-parties
  • Constructed a framework which would allow the company’s existing staff, combined with our ongoing assistance, to effectively implement and manage the fuel hedging program

Results

By implementing the policy, procures and framework we helped the client develop, the company now has implemented a successful bunker fuel hedging program which allows them to accurately and efficiently manage their exposure to volatile bunker fuel prices.