Price Risk Management
Lykins Energy Solutions offers multiple options to assist you in managing your fuel needs. Our goal is to provide each customer a unique solution tailor made to fit your budgetary constraints and ability to tolerate fuel price risk. We have the ability to supply your physical fuel needs as well as secure fixed and index basis pricing to meet today's challenging, ever-changing landscape.
Key benefits to participation in the Lykins fixed pricing programs are:
- Budget Assurance - Know in advance your total fuel cost for the year regardless of market volatility.
- Competitive Advantage - Take advantage of locking in low cost product.
- Cash Flow - Knowing your expenses for fuel in advance can help you plan for other expenses with a greater degree of certainty.
- Eliminate the Unknown - Creates less stress for your team to focus on priorities involved with growing your primary business objectives.
- Price Control - Ability to lock in a fixed price or cap and still participate if the market falls.
To learn more about managing your fuel needs, please contact Lykins Energy Solutions.
The EIA data below shows the volatile nature of fuel retail prices from 2007 through 2011 for various markets throughout the country. Future volatility and pricing upswings are not assured; however, the upside potential is completely unpredictable on the open market. Factors driving the volatility today include traditional supply and demand affects, global demand, geopolitical unrest, supply disruptions (weather), the value of the dollar and other events beyond our control.
It is important to note that engaging in hedging activities should be viewed as insurance against market volatility and not a pure money making opportunity. At Lykins we do not speculate as we feel the inherent risk in this type of transaction does not meet our business partners' objectives.
What can price risk management strategy do for you and your organization?
- Help you stabilize a variable and volatile cost to your business
- Allow for better cash flow
- Management can better measure line item performance
- Enables you to focus your resources on efforts to grow your core business objectives
- Insure your bottom line will not be impacted by dramatic upswings in the fuels
To learn more about what a price risk management strategy can do for you, please contact Lykins Energy Solutions.
Risk Management Programs
Diesel and Gas Supply - Risk Management Strategies
Our team of supply and risk management professionals will meet with you to determine the best overall strategy based on your individual needs, price exposure and risk tolerance. At Lykins Energy Solutions we strive for constant improvement to maximize value for our customers now and in the future.
- Fixed Price Contracts - Provides our customers with a valuable option that allows them to "fix" their fuel cost and guarantee supply for a specific period of time. Fixed price contracts give our customers protection from rising markets while allowing budgets to be easily managed.
- "Floating Price" / Basis Contracts - Lykins guarantees supply to you based on a floating basis differential. This product is popular to retailers as we can guarantee supply at a price under local rack or OPIS differentials. The "floating price" / basis contract insures you will always be competitive in the market place no matter what the overall market does.
- Fixed Pricing with Downside Market Participation - Allows for all of the benefits of a fixed price contract while enabling your price to "float" down to a predetermined level in the event that the market falls during the term of the contract. This program requires downside financial protection that we settle with the customer.
- Max Price Contracts - Max price or "cap" contracts allow Lykins to 'fix' a maximum price you will pay during the term while allowing you to participate on any price under the max price limit. Prices for this option vary depending on the markets and the max price required.
- Collar - The collar gives our customers the option to enter into an agreement that ensures guaranteed supply within a predetermined maximum and a minimum price range over the course of the contract. These contracts can be set up in such a way to be costless to you.
- Swaps - Swaps provide the option to our customers where supply can be obtained through existing sources while we hedge price risk for them. The swap would reference a floating price and the customer would be compensated the difference when/if that price was exceeded during the term of the contract.
To learn more about Lykins Energy Solutions Risk Management, please contact us.