Some organisations offer operators locked-in prices on fuel for periods up to 12 months, referred to as fuel hedging, a strategy often used by airlines in times of price volatility. However, one UK-based company believes hedging is a viable option for those with less substantial fleets.

Portland Fuel Price Protection offers operators the ability to hold their prices, even when oil prices rise, a service primarily directed at operators using vast quantities of fuel. However, the ongoing volatility in pricing could make it attractive to small and medium sized operators. Protection is provided by locking in forward prices on the wholesale oil markets and providing customers with 'insurance' against that price moving up. The customer still buys fuel from its usual suppliers, be that via fuel card or bulk deliveries to their tanks.

Founder James Spencer says: "There is nothing new in the concept of providing protection against rising prices. Large users of fuel have always used the mechanism to help set budgets. However, this is the first time that such a service has been offered to small and medium sized businesses consuming more modest amounts of fuel and we are currently experiencing record levels of fuel demand – mostly from China and India – putting significant pressure on oil prices."

The most common question to Portland on hedging is: "How do you know how much volume has been lifted?" Spencer says the answer is simple: "We don't need to know. The operator nominates in advance what volume is to be protected and that becomes the basis of the contract. If protection is taken out on 20,000 litres of Jet A1, that is the volume protected and if (for example) the wholesale price of Jet A1 rises by two pence per litre, then Portland pays out 2ppl x 20,000 litres. Portland does not need to know the exact cost the operator paid for fuel as the contract is based on the published UK wholesale price* and if that goes up, Portland pays. This can be replicated for fuel purchased anywhere in the world."

* Platts – the price upon which every litre of Jet A1 sold in the UK is based.