Hedging fuel prices - major Oil Hedge company goes bankrupt

[WHBM]

It's all very well hedging your future fuel purchases at a fixed price, but if the company you hedge with goes bankrupt you are back where you started. Or worse.

FT.com / Home UK / UK - Oil trading company files for bankruptcy (http://www.ft.com/cms/s/0/8d6342c8-584f-11dd-b02f-000077b07658.html?nclick_check=1)

any impact on airlines ?

[angels]

No.

The company was shorting oil on NYMEX as it rose. Finally the margin calls became too much for it and it filed for Chapter 11.

Anyone that traded with it via NYMEX will have the position taken up by the exchange.

[peter we]

It will impact on anyone who is contracted with them receive oil at a lower price than market.

[Rainboe]

I thought companies hedged direct with oil companies, not with faceless suites of offices in a Texas skyscraper that will promptly go 'into administration' when the punt they were taking goes bad! Oh dear! So they are on a one way bet? Take the profit if the hedge goes well, or roll over if it goes bad- either way they don't pay out! Kinda makes the whole hedging thing look a bit silly, doesn't it?

[WHBM]

.... with faceless suites of offices in a Texas skyscraper that will promptly go 'into administration' when the punt they were taking goes bad! Oh dear! So they are on a one way bet?
Sounds just like a typical US legacy carrier, doesn't it ?

[angels]

I'll clarify my earlier answer.

I don't think you'll find that the airlines were dealing with this company. It's a physical oil trader. Other oil companies traded with it, not airlines. It deals (note the present tense) with oil and natural gas gathering, transport and storage. The biggest creditors are other oil firms, Husky in Canada is one.

SemGroup say they're going to flog off a lot of assets (which are worth over $6 billion). This is the important thing about Chapter 11, it allows companies time to reorganise whilst protected from creditors. As you'll know from airlines, Chapter 11 means that a (slimmed) phoenix can arise from the ashes.

with faceless suites of offices in a Texas skyscraper

Rainboe - Gotta head north a bit mate, they're based in Tulsa! :}

[peter we]

It may not directly or immediately affect particular customers but there are always unforeseen consequences with this sort of finance. A reduction in the availability and increase in cost of hedging for instance. Another brick in the wall.

[WHBM]

Good to see this moved to Spotters Corner.

I wonder how many of those who understand fuel hedging and business cost projections are spotters ? :)

[angels]

Eek, just shoved a rude message up until I realised WHBM was the OP.

Agree mate, if anywhere this should be on Airlines etc.

[west lakes]

Seems to me though that airlines would tend only to worry about aviation fuel prices and no be bothered hedging oil prices. I'm sure they have no use for crude oil!!

[GOLF_BRAVO_ZULU]

Its collapse came as oil prices plunged to their lowest levels since early June.


I think the verb "plunge" must have acquired a new meaning to more closely align it to "dip".

It's always sad when hard working speculators get their a**es burned.

[apachelongbow]

I am sad that the 'hard working' speculators have only got their as** burned as of now.

I wanna see these guys lose the shirt off their backs. Speculation is the most wasteful and non productive ways of making a buck. Good that these guys lose.