(iii) Interest rate risk
Where the group enters into money market contracts for entrepreneurial trading purposes the activity is controlled using value-at-risk techniques as
described above.
BP is also exposed to interest rate risk from the possibility that changes in interest rates will affect future cash flows or the fair values of its financial
instruments, principally finance debt. While the group issues debt in a variety of currencies based on market opportunities, it uses derivatives to swap
the debt to a floating rate exposure, mainly to US dollar floating, but in certain defined circumstances maintains a US dollar fixed rate exposure for a
proportion of debt. The proportion of floating rate debt net of interest rate swaps at 31 December 2014 was 71% of total finance debt outstanding
(2013 65%). The weighted average interest rate on finance debt at 31 December 2014 was 2% (2013 2%) and the weighted average maturity of fixed
rate debt was four years (2013 four years).
The group’s earnings are sensitive to changes in interest rates on the floating rate element of the group’s finance debt. If the interest rates applicable
to floating rate instruments were to have increased by one percentage point on 1 January 2015, it is estimated that the group’s finance costs for 2015
would increase by approximately $377 million (2013 $312 million increase).