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Protecting Against an Oil-Price Blowout

There are still reasonable options strategies available for companies that aren't hedged against a further rise in fuel prices.

Vincent Ryan, | US
March 11, 2011

Upside, downside? Timing?

Interesting perspective. It would be more valuable if it considered the full range of consequences of the current political situation in North Africa and the Mideast. An appreciation of the negative price pressure that newly established governments, strapped for cash and free of OPEC commitments will create; and the timing of that potential, albeit short-lived, downturn in oil prices would be most helpful. A robust strategy of dealing with very near-term prices increases, a subsequent glut of oil looking for money and the longer-term price expectations would be ideal. After all, "timing is everything."

Posted by Patrick Slattery | March 17, 2011 07:16 am

A Market-Based Solution Can Solve Our Oil Problem

There are more cost-effective strategies against oil price volatility created by the current oil oligopoly than financial hedging; i.e. create motor fuel COMPETITION and CONSUMER CHOICE. Market competition requires individual and corporate action to create significant market demand for readily available and affordable non-petroleum motor fuels, such as natural gas, natural gas by-products (propane or LPG) and electricity. Support by progressive federal policy that reduces uncertainty would be helpful to jump start this market, but may not be essential given current price spreads and supply projections. Competitive markets founded on free-market principles of consumer choice can be created IF automakers decide to help themselves by helping America break the oil oligopoly; automakers need only agree to do something they know how to do -- mass produce affordable and profitable natural gas vehicles that give the consumer the ability to choose NOT to buy liquid petroleum-based motor fuels. Since the formation of OPEC in the early 1970s the American consumer, and our entire economy, have been at the mercy of the oil oligopoly. I am astounded that corporate and government economists and policy makers throughout the United States have ignored this fundamental fact for more than 40-years. I am even more astounded that since 1994 Republican lawmakers, a self-proclaimed business and taxpayer friendly political force, have failed to join with Congressional Democrats, and now President Obama, to seize this opportunity to use abundant, clean, domestically produced natural gas AND efficient electric drive technology to break the oil oligopoly and protect America from future oil-price blowouts.

Posted by David Bruderly | March 14, 2011 04:49 pm

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