How energy companies hedge against global oil price volatility

The Challenge of Oil Price Volatility

– Fluctuations driven by geopolitical tensions, OPEC decisions, and demand-supply dynamics.
– Energy companies face risks in revenue and operational costs.

Forward Contracts

– Companies secure oil prices in advance to avoid future cost spikes.
– Ensures stable expenses for refining and distribution operations.

Futures and Options

– Futures contracts allow companies to buy or sell oil at predetermined prices.
– Options give flexibility to benefit from favorable price movements while capping losses

Diversification of Revenue Streams

– Investing in renewable energy, natural gas, and biofuels.
– Reduced dependency on crude oil prices stabilizes overall revenues.

Vertical Integration

– Owning upstream, midstream, and downstream assets.
– Helps energy companies balance losses in one segment with gains in another.