And we would look for complaints about the cost, complexity and uncertainty that comes with a compliance regime that might require each security purchase to be tied to a specific hedging need or customer demand.
Other airlines are struggling with the prospect of large losses after hedging fuel needs at relatively high prices, like Continental Airlines, which secured 80percentt of it fuel consumption at $40 a barrel this quarter and 45percentt at $36.40 a barrel for the third quarter.
To do all this, however, a hedge needs to be well managed; thick, bushy, vigorous.
But that's ok, sometimes the hedge needs to be pruned.
Municipalities, for instance, may not be allowed to buy or sell derivatives unless these are clearly matched by an underlying interest (a loan that needs hedging, say).
"The levels of leverage within, and therefore the vulnerability of, hedge funds needed to be looked at more closely," the FPC said.
As prices have risen, the need for hedging by power producers and others has become critical.
A compromise between these rival theories and a more balanced view regarding the need for hedging and the scope of hedging activities is that hedging is motivated by the desire to reduce risks, as suggested by the Keynes-Hicks theory, but that the levels of inventory held by merchants and processors are determined by expected hedging profits, as Working has emphasized.
Southwest Airlines exemplifies this trend, with 80percentt of its fuel needs hedged for this year and 2005, and 30percentt for 2006 at prices below $30 a barrel.
Similarly, Union Pacific, the operator of the largest railroad in the nation, is also exposed to swings in the price of fuel, with 8percentt of its fuel needs hedged this year.
