There is no futures contract on aviation fuel. Combo Air Inc. has to buy 3 million gallons of aviation fuel in three months. Suppose you are in charge of Combo Air€™s hedging activities. You gather the following data:
Table 13a: Jet Fuel Cash Prices vs. Near Month
Energy Futures Prices: Correlations of
Price Changes

a. Which energy futures contract will you choose for hedging jet fuel purchase?
b. Is this a long hedge or a short hedge?

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1986-88 1986 1987 1988 0.76 0.89 0.32 0.74 0.73 0.19 0.45 0.70 0.72 0.25 Heating oil tures 054 076 0.80 0.3 Gasoline futures Crude oil futures