Saturday, December 20, 2008

Time for Airlines and Others to Hedge?

With the price of oil hovering at $40 and just under lately, it may be time for the airline industry and cruise industry to think about trying to lock in prices for the future. While there is talk of gas which is around $1.50 right now possibly going as low as $1 there is really no way to know for sure that it will. OPEC has already started to announce decreases in production and made promises (or threats) of decreasing output even more. If/when this happens, prices are going to go back up. The members of OPEC have become increasingly dependant on the high price of a barrel of oil in the past couple of years and some are actually hurting financially with the current drop and will do almost anything to get prices to rise. Knowing this, the odds of the price going up is better than the odds of prices dropping much more. Everything is a gamble, but being that the current prices are "good" for business now, is taking the gamble worth it? It may just be.

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