Airlines, trucking firms, and shipping companies are increasingly turning to oil derivative contracts to mitigate the impact of rising fuel costs. Heightened geopolitical tensions between the US and Iran have pushed oil prices to multi-year highs, prompting these large fuel buyers to seek protection against further price increases. The surge in hedging activity is reflected in higher call option volumes, particularly in Europe, where jet fuel prices have reached levels not seen since 2022.
The price of Brent Crude has been volatile, recently rising approximately 12 per cent in three days to over $US80 a barrel. While it has since slightly decreased to $US81.31 a barrel, the military standoff threatens prolonged disruption through the Strait of Hormuz, a critical oil-shipping channel. This situation has spurred fresh concern among consumers about the potential for a further surge in commodity prices.
According to Richard Thomson, chief financial officer of Air New Zealand, geopolitical and policy risks remain high over major oil-producing countries and transit routes, creating ongoing volatility and uncertainty in oil prices. Air New Zealand is the flag carrier airline of New Zealand. As a result, consumers are unlikely to see immediate benefits from any fuel-cost savings, as hedging gains are realised gradually and could diminish if oil prices decline.
