A hard nut to crack

Emissions trading

Oil refiners in the US have something to learn about using derivatives, if losses from their forward sales this year are anything to go by. But recent energy price volatility has certainly made it trickier to pick the right hedge. Connecticut-based Premcor, Houston-based Marathon Oil Corp and Valero Energy Corp in San Antonio, Texas are three of the refining companies that saw substantial trading losses after forward-selling crack spreads in 2004.

Crack spreads, or ‘cracks’, are calculated ba

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