The index-linked price depends on a number of oil indexes (e.g. Brent, gas oil or heavy fuel) and gas indexes (e.g. Zeebrugge Hub).
Your price 'floats' according to fluctuations in market indexes.
Depending on the indexes and the level of sensitivity in your price formula, costs will be:
- Either 'smoothed out', i.e. the impact of fluctuations will be dampened and spread out over time;
- Or more 'sensitive to market fluctuations'.
The 'smoothed out' pricing formula takes into account the average index levels in the longer term, making it less sensitive to market fluctuations, thereby limiting the associated risks.
Alternatively, if you choose the sensitive to market fluctuations' approach, you will be exposed to higher risks linked to short-term market volatility, but downturns in the market can also be very attractive. |