While most companies approach energy price risk management with the best of intentions, human nature often leads far too many down the wrong path, the path of a speculator. While speculation isn't a bad thing in and of itself, after all hedgers need speculators to provide them with liquidity, speculation masked as hedging often leads to incredibly poor and undesirable results.
The Mercatus Energy Pipeline
We've recently met with several clients regarding ETRM (energy trading and risk management system) system selection projects and, in our huble opinion, far too often the top items of interest and discussion are off-the-mark. As such we decided a list of the primary items to consider during the ETRM system selection process might be of interest to many. If we've misses any items which you think should be on the list please let us know and we will be glad to include them in an updated version of this post.
We recently complied a list links to a slew of resources for data and information related to energy hedging and risk management: CME/NYMEX, ICE, NASDAQ NFX, and DME product listings, DOE-EIA storage and inventory reports, EIA price forecasts, Baker Hughes rig count, etc. While the list isn't exhaustive or complete, it should provide you with the vast majority of data you need for basis market research related to hedging and risk management. If you're aware of any other resources that others might find to be informative please let us know and we'll add it to the list.
As energy risk management advisors, we're often called in to help clients "stop the bleeding" caused by flawed energy risk management methodologies, practices and strategies. While we could easily write a book on the most common mistakes we encounter in our work, the following is a list of the erros we have witnessed most often in recent months.
As more and more companies are looking at hedging their exposure to volatile fuel prices, many for the first time, we thought it would be prudent to revisit our recommendations regarding the development, or updating, of a corporate fuel hedging policy. So, how does one go about developing a fuel hedging policy (also often called a fuel price risk management policy)?
Many companies today are faced with an unprecedented combination of economic, political and regulatory uncertainty. Exposure to energy price volatility adds another layer of risk to an already difficult environment and to succeed companies clearly have to to find ways to mitigate this risk. Hedging remains one of the best ways that companies can mitigate energy price risk and the subsequent budget uncertainty.
1. Identifiy, Analyze and Quantify All Risks
As many companies are currently planning for 2017 and beyond, now is an ideal time to review your energy risk management program, including whether your team is prepared for the challenges of the upcoming year. Regardless of whether you're a Fortune 500 company or a small, family owned business, you need to determine whether or not your team your team is well prepared to do all of the following:
Whether you're an energy consumer, marketer, producer, processor, refiner, risk manager, trader, transporter, there are dozens of relevant conferences and events being held across the globe and throughout 2017 that may be of interest to you. While we clearly can't attend every industry event, we do attend many of them and would be glad to meet with you while we're there. If you woud like to meet with us during any of these events, please contact us. The following is the list of 2017 top energy trading and risk management related conferences and events we're aware of as of today.
Given the signiicant volatility in fuel prices in recent weeks, we’ve been fielding numerous inquiries from companies who are interested in developing a fuel hedging program for the first time in their company’s history. If you lack the knowledge to consider yourself a fuel hedging expert, this post along with several more that we'll be publishing shortly, will help you better obtain a better understanding of most common fuel hedging strategies available to commercial and industrial fuel consumers.