Managing Risk in the Context of Fluctuating Oil Prices
Geopolitical events can affect oil prices, which have undergone numerous complex fluctuations since the 1970s. However, despite this instability and the current challenge of the COVID-19 pandemic, along with the efforts to instigate an energy transition, the fact remains that oil is one of the main sources of energy.
As an investor or business, you need to ensure that you have measures in place to manage and mitigate the risks of fluctuating prices to your organization. Below are some of the determining factors that we have observed at Viaro Energy, which have helped us remain profitable despite the volatile market conditions.
Our decision to acquire RockRose Energy in a £ 248 million deal, which came at a time of great geopolitical instability and decreasing oil prices at the height of the COVID-19 pandemic, came as a result of the steps outlined below. By looking past the ongoing crisis, we were able to recognize the potential of this asset, which allowed us to reach a turnover of over £ 800 million in 2020.
Keeping fuel costs within a predictable range protects you from any unexpected changes or circumstances in the price of fuel around the world. If you are able to keep your consumption within a determined range, then you can protect your profit margins and future stability.
You should always try and stay focused on your core business. Fuel price hedging can be a complex business, and relies on a plethora of factors. If you are spending too much time worrying about fuel prices and trying to mitigate their effects, you should employ the knowledge and experience of financial experts to help you, leaving you free to focus on what it is that you do best.
Always stay proactive in your risk management, as COVID-19 has shown us that instability can come at any time. If you are reactive, it is easy to remain overly cautious and try to minimize the risk until stability is reinstated, but often there are no guarantees when this will happen. There are opportunities even in volatile markets, and if you are prepared to seize them, this will give you an edge over the competition. By being aware of your strengths and weaknesses, you can recognize them and act quickly in accordance with any market conditions that present themselves.