Word: bbl
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...coincidence that Kelly is now Southwest's CEO. While oil prices are currently bobbing around $55 per bbl., this year Southwest is paying just $26 per bbl. for 85% of its oil, thanks to the aggressive hedging strategy he put in place several years ago. The industry overall lost about $4 billion as a result of higher oil prices last year; in contrast, Southwest's hedging reduced its energy costs by $455 million, helping bump its 2004 earnings to $313 million. According to Vaughn Cordle of Airline Forecasts, oil would have to shoot past an average of $65.30 per bbl...
...sell them in a short-term cash crunch. Those hedges would have protected about a third of its fuel needs. Continental has no hedges in oil-futures contracts this year. United Airlines, which filed for bankruptcy protection in December 2002, has 30% of its fuel hedged at $45 per bbl...
...cover $26 barrels of oil for anyone, no matter how much cash the airlines can put up front. That's why Southwest's fuel savings will decrease with time. In 2009, for example, the airline will be able to buy just a quarter of its fuel at $35 per bbl. No partner is willing to cover hedges that low now that oil has passed $50 per bbl. "We're willing to write hedges," says John Kilduff, an energy analyst with brokerage firm Fimat. "The question is, Does it make sense to be locking in crude oil when prices are this...
...ExxonMobil, success has bred an odd problem. With oil prices hovering near $50 per bbl. recently, the energy behemoth has been churning out profits. Over the past 12 months (through the end of March), earnings gushed to $28 billion--almost 40% above the previous year--on revenues of $306 billion. With minimal debt, the oil giant, based in Irving, Texas, is sitting on a $30 billion hoard of cash. The problem: What will the company do with all that loot...
...program was doomed almost from the start. The price of oil peaked at more than $40 per bbl. in 1982 and has fallen steadily since, to about $27 per bbl. today. It has thus become much cheaper to import oil than to manufacture synthetic fuels. And that has made projects like Great Plains losing propositions. Says Energy Secretary John Herrington: "Oil and natural-gas prices have simply not proved high enough to make the [Great Plains] project economical. On balance, the costs outweigh the benefits...