Originally Posted by
Mesabah
You just don't lock in prices, someone is on the opposite end of the trade. At $20bbl, Delta would have to buy call options, and then could lose billions when the price of oil doesn't go up enough. The best way to hedge is to not do it at all. Hedging is no different than putting $1 billion on black at a roulette table in Vegas.
It's not quite like routlette.
I think over the long term a fuel hedging strategy will even out the highs and lows of fuel costs making it easier to predict costs. You won't always be on the winning or losing end of the deal, but on average you will be just as well off as someone who has not hedged and you will have a more predictable number for cost estimates.