Just as no financial institution can be excused to not forseeing the stock market issues that they've experienced, no energy company can be excused for not making provision for the day that oil prices would go through the roof.
Er, indeed. That's why Energy Traders and Energy Risk Analysts get paid so much money :p And the clue is in the job title ... *Risk* analysts. It's their job to minimise it. And if oil prices (which everything else is linked to) can be seen to steadily rise, constantly, it's not exactly a difficult leap of faith to imagine them to continue to so so, and therefore try to get as much energy bought on long-term contracts as physically possible.
Or to put it another way, if you knew for eaxmple in 2004 that prices would double by 2008, you'd buy enough energy *then* for future contracts (at 2004 prices) thus mitigating any medium-term price rises (of course if prices rise constantly and rapidly for a decade then at some point there'll be a catch-up, but, er, they haven't!).
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branchandroot
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Date: 2008-09-22 09:16 pm (UTC)Er, indeed. That's why Energy Traders and Energy Risk Analysts get paid so much money :p And the clue is in the job title ... *Risk* analysts. It's their job to minimise it. And if oil prices (which everything else is linked to) can be seen to steadily rise, constantly, it's not exactly a difficult leap of faith to imagine them to continue to so so, and therefore try to get as much energy bought on long-term contracts as physically possible.
Or to put it another way, if you knew for eaxmple in 2004 that prices would double by 2008, you'd buy enough energy *then* for future contracts (at 2004 prices) thus mitigating any medium-term price rises (of course if prices rise constantly and rapidly for a decade then at some point there'll be a catch-up, but, er, they haven't!).