Defence: Procurement
(asked on 1st October 2018) - View Source
Question to the Ministry of Defence:
To ask Her Majesty's Government what are the implications for the defence budget of rising oil prices.
This question was answered on 15th October 2018
The Ministry of Defence (MOD) undertakes substantial purchases of fuel commodities, the price of which will be influenced by oil prices. The Department secures a degree of protection against changes in price by purchasing hedging contracts that are equivalent to buying a proportion of forecast demand at agreed prices in advance.
The MOD hedges up to three years in advance and usually trades quarterly to further spread price risk. This approach has been used for fuel hedging since 2010.