For the past 30 years,companies have been offering pricing programs(fixed and capped)to give their customers peace-of-mind,maximize company sales margins and minimize customer attrition.The methods to offer caps have usually centered around a combination of Merc-related hedges,often locking in"supplier diffs,"and sometimes using physical inventory and/or weather hedges.The key issue being hedged was generally the price of oil on the Merc,as everything seemed to flow from there.Basis differentials(the spread between the Merc and the price charged by suppliers)were always on the radar,but they were generally stable and were hardly anything that kept people awake at night-the"diffs"did move,but the movements were generally small,just the matter of a few cents per gallon in either direction.
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