1)GWS could buy oil futures contracts to hedge the fuel oil price risk. If the price of fuel oil is lower in the future, GWS will be able to purchase fuel oil at a lower price but lose money on its futures position. If the price of fuel oil increases in the future, GWS will lose money by having to pay a higher price for fuel oil, but it can offset the higher spot price with a gain on its futures position.
(2)GWS may also consider a double-trigger option insurance arrangement using fuel oil prices and property losses as triggers. Under the double-trigger option, the insurer would only make a payment to GWS if both contingencies—high fuel prices and high property losses—occurred. The agreement would specify both the fuel price per gallon and the level of property losses that would jointly trigger payment. If only one contingency occurred or neither contingency occurred, the insurer would have no liability