The brief of the Fuel Procurement Advisory Committee (The Times, April 13) did not extend to advising politicians to use a hedging technique to purchase some sense over how they debate the impact of international fuel prices on the actors within our domestic economy. Hedging has been a political football for years. Enemalta hedged its purchases during the 1996-98 Labour interregnum. And the Nationalists lambasted Labour for the way it did it, and still do so now.

Under the Nationalist government since 1998, Enemalta prevaricated: it didn't hedge, then did, then didn't, now it's considering it - and Labour fires away on all counts. Basically, the Nationalists, having started the yah-booing, made a mess of the hedging instrument by not using it in a timely fashion. And Labour projects the impression that hedging can reduce or restrain the acquisition and thereby domestic supply price of fuel.

The simple reality is that regular hedging - programmed buying or covering at the forward price - can smooth out an upward trend, thereby reducing shocks. It cannot buck the trend. Should the trend turn, supplies secured or covered at a forward price will cost more than if purchased at the current (spot) price.

That reality includes the complication, for those whose currency is other than the US dollar, that exchange rates also fluctuate. There are two variables (prices that can change), not one. The procurers, therefore, should also cover forward their US dollar requirements, since international energy prices are set in the greenback.

The reality also requires judgement, which can never be perfect. That is why it makes sense to forecast energy requirements and secure the forward domestic currency price - energy products covered forward, with the dollars required to finance them also secured at the forward exchange rate.

Within these realities the politicians can argue about who of them judges best and gets it more right or less wrong most of the time. They should not ignore reality and try to fool most of the people most of the time. Politicians have ample space to debate past pricing policies, including the failure to raise energy prices gradually in line with the market, while adjusting policy to help the neediest.

They should, however, respect the people's right to see them looking ahead in an informed manner. Politicians should thoroughly digest the basic approach to the intricacies of hedging reiterated by the Fuel Procurement Advisory Committee so that, whether in government or in waiting, they keep to the fore the technical basis which should underpin any energy policy by the state sector.

In a nutshell: 1 consider hedging up to 75 per cent of requirements, provided the cost to cover is not too relatively high; 2 hedge for six to nine months on a rolling basis (thus riding the shifting trend, and averaging forward); and, 3 examine the possibility of 24-36-month cover against unforeseen events.

Doing that could mitigate acquisition volatility and reduce the frequency of domestic price changes necessitated by shifts in the international energy and currency markets. One can consider timing decisions differently - to buy according to one's expectations of price movements, rather than to a set programme of regular purchases, to average costs as one moves forward.

What nothing and no one can do is to bring about reductions in acquisition prices or ensure that they do not rise in Malta's regard.

Rolling forward to average purchase costs may be less exciting than trying to peer into the future for what one believes is the right moment to buy. It is also less risky over time. Politicians should not be in the business of taking risks with matters of such great national social and economic interest.

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