Innovation in the Oil Futures Market: Expanding Fixed-Rate Contracts into the Consumer Facing Retail Market
Public Deposited- Last Modified
- February 26, 2019
- Creator
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Goronkin, Shane I.
- Affiliation: Kenan-Flagler Business School
- Abstract
- The oil industry is constantly plagued by radical shifts in supply and volatile fluctuations in prices. Many of the industry’s largest consumers will adopt price hedging strategies through the use of futures contracts in order to become protected from unpredictable movements in the cost of oil and gasoline. The adopters of this strategy have realized significant returns which suggest that a similar model could be offered to the general individual consumers of gasoline. This purpose of this research is to evaluate this unexploited opportunity and to determine the best model of expanding into the model of fixed-price gasoline contracts for the general consumer. The research demonstrates a high degree of value creation for both the consumer and the retailer: in any given timeframe between 2008-2016, consumers who logically exercise the fixed-rate contracts save an average of $.70 per gallon while the retailer receives an incremental return of $.61 per gallon through the price hedging usage of futures contracts.
- Date of publication
- spring 2016
- Keyword
- DOI
- Resource type
- Rights statement
- In Copyright
- Note
- Funding: None
- Advisor
- Colacito, Riccardo
- Degree
- Bachelor of Arts
- Honors level
- Highest Honors
- Degree granting institution
- University of North Carolina at Chapel Hill
- Extent
- 74
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