Hedging Haircuts and Big Basis Moves

EPRINC trustee Ben Montalbano and non-Resident Fellow Trisha Curtis, both co-founders of PetroNerds, have just completed an assessment of oil hedging positions of 25 major oil producers in the Permian Basin.  Hedging is a valuable tool for distributing risk and allowing producers to protect revenue streams from price volatility. Hedges protect producers revenues when oil prices fall, but also limit gains when prices rise.  In addition, when oil prices rise it may limit the supply response if a large volume of unconventional production is hedged. Ben and Trisha’s assessment shows the percent of total production that producers hedge varies, but heading into Q1of 2018 producers hedged about 20% of total output. A copy of their assessment can be found here.

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EPRINC’s Max Pyziur Presents at the annual Energy Information Administration (EIA) Conference
Max takes us through the role octane has played to meet both engine performance requirements as well as its growing role as a strategy to meet the regulatory requirements of Corporate Average Fuel Economy (CAFE) standards.  As is always the case when it comes to fuel specifications and engine performance, it is complicated. Max outlines the historical trends and the trade-offs ahead.  The event took place on June 26, 2017 in Washington, DC. The presentation can be found here.