What Strategies Can Businesses Use to Mitigate Fuel Price Risk?
There are several strategies businesses can employ to manage fuel price risk:
Hedging: Companies can use financial instruments such as futures contracts and options to lock in fuel prices and mitigate the impact of price volatility. Diversification: Diversifying fuel sources and investing in alternative energy can reduce dependency on a single fuel type and spread risk. Efficiency Improvements: Implementing energy-efficient technologies and practices can lower overall fuel consumption, thereby reducing exposure to price fluctuations. Long-term Contracts: Negotiating long-term contracts with fuel suppliers can provide price stability and predictability.