Refinery Hedging Programmes
Locking refining margin; static and dynamic hedging; multi-horizon and risk infrastructure
Refinery Hedging Programmes
Executive Summary
A refinery is a spread business: it buys crude (input) and sells products (output); profit is the margin between the two. Refinery hedging uses derivatives to lock that margin—typically by buying crude and selling products (gasoline, diesel) in the futures or swap market—so that operational profit is stabilised. This module covers refinery operational structure, hedging programme design (static vs dynamic, multi-horizon), optimal hedge ratios, risk infrastructure, and best practices. For practitioners and consultants, it supports refinery treasury and risk management.
Learning Objectives
By the end of this module you will be able to understand refinery operational hedging and its role in locking refining margins, analyse dynamic hedging strategies that respond to margin changes, evaluate multi-horizon hedging (e.g. 12-month forward hedges, rolling programmes), design optimal hedge ratios given commodity volatility and correlation, and assess refinery risk management infrastructure and best practices.