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Delta loses $450 million bet on fuel prices
Delta Air Lines is taking a $450 million loss because jet fuel prices didn't jump as much as the airline bet they would. The Atlanta-based airline had locked in fuel purchases, in a contract known as a hedge, at levels above the current market value, betting that jet fuel prices prices would climb. And they did indeed rise. But they didn't go nearly as high as Delta had anticipated, which made that hedge a loser. So Delta pulled out of the fuel contracts, which cost the airline nearly… (money.cnn.com) Más...Sort type: [Top] [Newest]
The whole hedge / speculation / futures trading thing, whatever you want to call it, serves a valuable function in actually stabilizing world prices and supply of petroleum products over time. As pointed out in another comment huge profits were made when oil did skyrocket and those profits will offset the losses. You win some, you lose some, but in the end you are better able to project costs long term and in a business as fuel hungry as an airline, that's pretty darn important.
I thought Delta owned their own refinery. How much money did the refinery make?
Yes, Delta owns their own refinery but buy their crude at the market. Their losing money on oil hedging.
Hedges are insurance policies, not bets. These were protetective trades in case the worst happened, not speculation on the direction of fuel prices.
Hedges are bets/speculation. Buyer/seller is speculating what direction the price of a commodity will be x-number of months down the road. Hedges are risky. Money can be made and lost.
Clearly I cannot spell. "Protective"