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Hedging your bets with diesel prices
Page 11
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A BANKER IN THE south-west of England is urging hauliers to consider buying fuel on a fixedprice agreement to help them manage their budgets.
Helen Jenkin, regional treasury partner for the Clydesdale Bank, reports that "hedging" deals could protect hauliers from fuel rises for up to three years.
These deals, which operate in a similar way to a fixed-price mortgage on property, are seen by some financial experts as a protection against future rises.
Jenkin explains:"Essentially the bank takes a view on the future price of fuel and a hedging policy can protect a firm against extreme price movements."
But one of the difficulties for hauliers considering hedging deals is that the banks often demand very large contracts for the best deals. In Clydesdale's case this means an annual fuel hill of more than £750,000, an amount which Jenkin admits only the largest" hauliers face.
In a bid to overcome this problem, Jenkin is negotiating with a fuel distributor to arrange for hauliers to come together as a group so they can reach the £750,000 threshold.
One of the risks for hauliers in taking on a hedging deal would be if the price of' fuel were to drop. Jen kin concludes: "The difficulty is that this would put them at a disadvantage to their competitors who weren't locked in to fixed-price deals. We wouldn't want to put any companies in the position of being uncompetitive."