Publications: Notes at the Margin

Hedge Now! (August 20, 2018)


Now is the time for energy producers, energy processors, and energy consumers to hedge. Now is the time for those exposed to energy price fluctuations to invest in some type of financial insurance. Now is the time for the world's airlines to protect against dramatic jet fuel price changes. Now is the time for producers in the Permian Basin to guard against a sharp decline in cash flows.


The hedging of future profits is more important today for corporate survival than at any time in my career. The reason is simple. Today, numerous circumstances exist that could send prices and margins up to record levels or, in contrast, cause a catastrophic economic slowdown that plunges prices and margins to record lows.


Which future will prevail? Toss a coin. Heads means record highs. Tails means record lows. Right now, my coin lands on its edge.


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