RISK MANAGEMENT/PROGRAMS

Firm Fixed Price Programs

The Firm Fixed Price Program assures availability of supply at a set price for a set period of time. By knowing what your fuel price will be in advance, you budget effectively, protect margins, and bid on new business with confidence.

Firm Fixed Price Programs with a floating “trigger price”

This program is similar to the Firm Fixed Price Program in that it assures supply availability for a set period of time. However, when the contract is signed, you lock in a fixed differential to the NYMEX but not the actual price. The ultimate price you pay is not determined until you ‘pull the trigger’ at which time the differential is then added to the NYMEX price for the benchmark commodity. This flexibility is designed to take advantage of any price dips that occur in the market any time up to one month before the month the product is delivered.

Cap Programs

When you purchase a Cap Contract, you establish a “cap” or maximum price for a specific volume of product for the months of your choice. If prices fall, your price will also fall and there is no limit to how far your price will fall with the market. For this protection against rising prices, a customer pays an up-front premium, with the amount of the fee based on the cap price desired and how long you want the protection.

Collar Programs

Like the Cap Program, the collar includes a maximum price for a specific volume of product for the months of your choice. In addition, a minimum or ‘floor’ price is established. The price you pay is always within this agreed upon price range. There is a premium paid up-front for this program but generally less than the Cap premium because you are sharing in some of the risk if the market price falls below your price floor.

OPIS Index Pricing Programs

The Oil Price Information Service (OPIS) publishes fuel price information on a daily basis for all major U.S. markets. The OPIS Index program allows you to tie your price to the ‘going rate’ in your market as defined by OPIS. You pay a fixed differential over or under the OPIS reference price you establish.

Platts Cash Market Index Pricing Programs

Through this program, your price is indexed to the price in the Cash markets in New York, Chicago, or the Gulf Coast. You pay the current Cash price (as reported by Platts) plus or minus a fixed differential.

New York Mercantile Exchange Index Pricing Programs

Under this program, the price you pay is indexed to the benchmark commodity in the New York Mercantile Exchange (NYMEX) futures market. You pay a fixed differential over the NYMEX price at the time the contract is executed.