Originally Posted by
Golf Charlie Charlie
Most oil hedging contracts are also in the form of options, ie. they give you the right to buy not the obligation to buy. If oil falls below the contract price, you can let the option fall away unused and buy at the market price on the day. Of course, you have to pay a price (like a premium) for writing the option in the first place, but it's not an unreasonable price to pay - risk versus reward.
The typical premium paid for oil hedging options is 10% up front. If Ryanair have contracted to $129 a barrel for September they paid $12.90 a barrel when they did the contract and will pay the remaining $116.10 should they take fuel at this price. If they later want to buy on the spot market it has to be less than this. Furthermore Ryanair are obviously not buying barrels of Brent crude, but Jet A-1, and there is a difference in pricing between the two which fluctuates.