HED GIN G The Online Edge
Dealers say online purchasing cuts risk, adds flexibility BY S T EPHEN B E N NE T T
Fuel oil dealers' trucks line up at a terminal operated by Sprague Operating Resources. Photo courtesy of Sprague Operating Resources
O 22
NLINE PURCHASING THAT ENABLES MORE TIMELY SPOT BUYING is now also helping to reduce risk associated with pur- chasing for their forward price protection programs,
some fuel oil dealers find. "Five years ago or so the market really started to move quicker
than you could communicate to the customer," said Ian Cook, vice president of operations for C.E. Kiff, Delhi, N.Y. "A smaller dealer needed to have more of a real-time picture of what they were purchasing in fuel." Cook and other dealers said they were making use of a recent
enhancement to an online service long offered by Sprague Operating Resources, a wholesale supplier based in Portsmouth, N.H. The company has helped dealers manage price volatility via online purchasing for years, said David Daoust, Sprague's man- aging director, but most of that activity centered on day-to-day "prompt" purchases. In December the company added a feature
MAY 2012 | FUEL OIL NEWS | www.fueloilnews.com
to the online service, designed to help dealers better manage the risk associated with their forward price protection programs, Daoust said. Typically, retailers are exposed to significant margin risk as
they balance customer sales with hedging instruments of a differ- ent size – forced to lock in hedges in NYMEX-stipulated 42,000 gallon minimums and increments, Daoust noted. The new online service offers dealers the ability to hedge customer-sized volumes, Daoust said. "After the 2008-2009 heating season, our customers were
looking for a way to minimize the risks associated with their for- ward price protection offerings," Daoust said. "We designed the Small Volume HeatCurve and have made it available on Sprague Real-Time [the online service] to meet that need," Daoust said. The supplier had long allowed retailers the chance to lock in fixed prices and volumes on a degree-day weighted "curve,"
