Price risk management
Stop the volatility of jet fuel prices hampering your business’s margins. At Shell, we have been developing options that give you the opportunity to balance the prices your business pays for fuel through long-term pricing risk management agreements that enable greater predictability and future planning.
Price risk management helps to create more certainty around fuel costs. Jet fuel prices can be affected by changes in supply or demand, as well as natural, political, or economic world events. Our price risk management can help to tackle this price uncertainty.
Why choose Shell Aviation for support managing jet fuel price volatility?
Shell Aviation’s price risk management tools help airlines tackle one of their largest operating costs: fuel. Jet fuel price volatility can be problematic for budgeting and planning, and it can affect your ticket prices and business margins. Get more certainty with Shell.
Shell Aviation price risk management tools
Shell Aviation’s risk management tools are designed as a simple strategic response for customers who have previously struggled to get a long-term fuel plan off the ground.
We created it to be a simple and cost-effective way to manage fuel costs, giving a reassuringly transparent and predictable solution for fuel supply. Our price risk management solutions are designed to:
- Help limit your exposure to fuel price surges for volatility;
- Support you in establishing a fuel cost range for business planning; and
- Give you simple solutions that may help to reduce working capital cost and administration associated with jet fuel hedging.
Our price risk management tools include:
- Cap (max) pricing – This protects against fuel cost surges. With this option, you buy fuel at the prevailing market price, capped at a maximum price for a specified monthly volume and period.1,2 Locking in a maximum price level could help with business planning. Choosing cap (max) pricing could also limit your exposure to price surges while allowing you to benefit fully from falling market prices;
- Fixed pricing – This option allows you to buy fuel at a fixed price for a specified monthly volume and period1. This gives you certainty over jet fuel costs, and limits your exposure to price rises, which helps you manage aspects such as cash flow and borrowings, shareholder assurance, and business planning; and
- Collar (max/min) pricing – This secures fuel costs within an acceptable range. You buy fuel at the prevailing market price between a maximum (ceiling) and a minimum (floor) price for a specified monthly volume and period (with potentially zero premium).1,2 Establishing a fuel cost range can help you manage fuel costs, limiting your exposure to price rises while helping you partially benefit from a falling market, and make business planning easier.
1In the case of underlift and overlift, there are applicable terms in Shell’s standard fixed price physical framework agreement.
2This pricing solution may be subject to a premium paid upfront.
The benefits of Shell Aviation’s price risk management service
By working with Shell Aviation to help you manage price risk, your business could benefit from:
- Shell’s strong supply chain and world-class standards in supply safety, operations, and product quality;
- Dedicated support to help reduce administrative complexity in implementing your pricing solution;
- A choice of pricing solutions for managing fuel price volatility;
- A simple and quick setup linked with existing fuel supply agreements;
- Flexibility to convert pricing terms of exiting contracts from formula to either fixed, cap, or collar during the duration of the contract, subject to negotiation with our pricing team; and
- Potentially reduce working capital cost and administration associated with paper derivatives hedging.
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