Superwash has shelled out a whopping $30,000 more for their utilities during the first five months of 2011 than last year, with its president suggesting a BEC move to hedge would stabilize prices for struggling businesses.
"If the government could figure out how to remove the volatility from the cost of fuel I think it would be extremely beneficial to businesses," Dionisio D'Aguilar told Guardian Business yesterday.  "The best answer would be if you were to hedge your fuel costs."
"If it will bring stability to the cost of energy in this country, I would go for it.  Businesses could then better plan, better budget and better price."
A move like this, argues the former Chamber of Commerce head, is one that would not likely gain favor with the decision makers of the country, given the risky nature of hedging at a higher price.
While hedging reduces the risks associated with the uncertainty of fluctuations in price, it could result in a company paying more, or less for fuel.  Airlines frequently use fuel hedging to manage their costs, but it could be costly and impractical for the average business. The process includes complex contracts that demand up front spending as well as ongoing administrative costs.  As a result, fuel hedging is generally used by large fuel consuming companies to manage price fluctuations by locking in costs through a commodity swap or option contract.
However, the average small to medium sized business suffers the most when crude oil prices increase.  Superwash, for example, has not passed on the increases to its customers, said D'Aguilar, even though his costs for propane and electricity went up by $20,000 and $10,000 respectively.
"We have absorbed the substantial increase in fuel," he added.  "Even if the average price was lower than the hedge price... if I knew for the next two years that my price was x, I could better manage my business and that would be great."
The factors that pose the greatest challenge to getting such a proposal off the ground, however, would be in getting both the government and opposition to agree on the decision.
Still, the idea has had traction in the business community in recent months, following cautions by Prime Minister Hubert Ingraham that higher oil prices could affect businesses this year.
Khaalis Rolle, chief marketing officer of Bahamas Fast Ferries and immediate past president of the Bahamas Chamber of Commerce and Employers Confederation, recently met with a Morgan Stanley commodities expert from New York to explore hedging alternatives for The Bahamas.
Rolle pointed out earlier that in The Bahamas, hedging, especially in the commodities markets, was often considered a sophisticated tool only available to multinational companies.

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