Originally Posted by
RockyBoy
The refinery doesn't insulate us from the cost of crude to refine though. It just insulates us from the crack spread which isn't much right now. Still a good move in my opinion over the long term as oil will eventually go higher and crack spreads will increase.
I'll bet if we saw the average fuel cost over the last decade between Delta which hedges and AA which does not, they would be very close. Not sure on that, but hedging just takes some volatility out of it. We never see the figure on what hedging saves us, just on what we lose when it doesn't save us.
Somewhat of a semantic argument. We are able to negotiate
directly for the price of crude rather than be dependent on the market
and the crack spread. We cut out the middle man with the refinery. Yes, you are correct that the crack spread is the main determinate in the ultimate price of jet fuel, but unlike any other carrier, we have a way to negotiate on the raw material. They have to take the retail product whereas we do not.