By: Andy Pfaff - Coherent Commodities

Diesel rarely attracts the same attention as interest rates, stock markets or headline inflation. Yet it remains one of the most important operating inputs in the global economy.

It powers trucks, trains, agricultural machinery, mining fleets, fishing vessels, construction equipment and backup generators. When its price rises sharply, the consequences travel through supply chains and ultimately reach businesses and consumers far beyond the fuel pump.

That risk is again becoming impossible to ignore.

In September 2026, the average price of diesel in the United States moved beyond $6 a gallon, compared with approximately $3.71 a year earlier. The increase followed disruptions to international fuel flows, renewed conflict in the Middle East and reduced refinery exports from Russia. Brent crude and US oil prices had also moved back above $100 a barrel.

The impact extends well beyond the United States. Countries in Africa and Asia that depend heavily on imported fuel may be particularly exposed to international supply disruptions, currency movements and higher transport costs.

For businesses that consume large volumes of fuel, the issue is not simply whether diesel is expensive today. The deeper problem is that fuel prices can move faster than budgets, contracts and selling prices can adjust.

Diesel is an operating risk, not merely a commodity price

A transport operator cannot immediately remove diesel from its fleet. A farmer still needs to plant, harvest and move produce. A mine must continue operating its loading and hauling equipment. Goods still need to reach warehouses, retailers and customers.

This limited ability to reduce consumption means that fuel-price shocks can compress operating margins surprisingly quickly.

Some of the increase may eventually be passed on through fuel surcharges, revised transport agreements or higher prices. However, this adjustment frequently happens with a delay. Existing contracts and competitive pressures can initially force businesses to absorb much of the increase themselves.

The effects then move through the wider economy. Diesel is used throughout the food supply chain, from farm machinery and fishing vessels to trains, refrigerated trucks and supermarket deliveries. The Associated Press reports that higher costs are already appearing in logistics surcharges, while the eventual effect on grocery prices may increase as contracts are repriced.

For fuel-intensive businesses, this is therefore not a temporary procurement inconvenience. It is a material financial risk that can affect margins, cash flow, budgeting and competitiveness.

The problem with conventional fuel hedging

The obvious response is to hedge the fuel price. However, the design of the hedge matters just as much as the decision to hedge.

Traditional approaches commonly attempt to fix the future fuel price or significantly narrow its possible range. When prices rise, gains on the hedge help compensate for the higher cost of buying physical fuel.

The difficulty appears when prices fall.

A conventional hedge may lose value as the physical fuel price declines. The business pays less for fuel but loses money on its hedge, reducing or eliminating the benefit it would otherwise have received.

The hedge may have performed exactly as designed, yet the commercial outcome can still disappoint the company using it.

This happened dramatically during the oil-price collapse of 2020. Airlines that had hedged substantial portions of their future fuel requirements faced large losses on their financial positions. Those losses were offset by lower physical fuel costs, but the hedges prevented the airlines from receiving the full economic benefit of the decline.

The underlying problem is that many traditional hedging strategies treat fuel-price risk as symmetrical. They are designed on the assumption that upward and downward price movements should both be reduced.

That is not how a fuel consumer experiences risk.

A mine, farm or transport company wants protection when diesel prices rise. It generally does not want protection from falling prices. Lower fuel prices improve its operating economics and may strengthen its competitive position.

Its risk is therefore asymmetrical.

A business should not have to drive with the brakes permanently applied

Traditional hedging can be compared to driving a vehicle with the brakes applied at all times.

Keeping the brakes on may reduce the risk associated with speed, but it also prevents the vehicle from performing its intended function efficiently. The driver does not need the brakes permanently engaged. The driver needs them to respond effectively when conditions require them.

A more appropriate fuel-risk strategy should work like an anti-lock braking system. It should provide protection when prices rise sharply, while reducing its intervention when prices fall.

In investment terms, this means seeking an asymmetric payoff profile:

• a positive or protective response when fuel prices increase;
• low or limited negative correlation when prices decrease; and
• the ability to adapt as market conditions change.

No hedge is perfect. There will always be trade-offs involving cost, timing, liquidity, basis risk and the degree of protection provided. The objective should not be to eliminate every price movement. It should be to manage the movements that can materially damage the business while preserving as much beneficial price movement as possible.

Why passive monitoring is not risk management

Businesses sometimes watch fuel markets closely but delay taking action because they expect prices to normalise.

The current environment illustrates the weakness in that approach. Fuel prices are influenced by numerous variables that businesses cannot reliably forecast: geopolitical conflict, shipping constraints, refinery capacity, sanctions, exchange rates and changes in global demand.

The Associated Press reported in September 2026 that Middle Eastern crude production was not expected to return to pre-war levels before the end of 2027. That forecast may change, but it illustrates how a fuel shock can become a prolonged operating condition rather than a brief interruption.

Hedging should therefore not depend on a company believing it can consistently predict the direction of oil prices. A strategy that only succeeds when management’s market forecast is correct simply replaces one risk with another.

The more useful question is:

Can the business build a structured response that remains relevant across both rising and falling markets?

Making sophisticated hedging strategies more accessible

Advanced, systematic investment approaches can be used to create more adaptive exposure to fuel markets. However, businesses and investors have historically faced another obstacle: accessing these strategies directly can require derivative trading accounts, collateral management, daily margining and specialised operational infrastructure.

An investment structure such as an Actively Managed Certificate, or AMC, can provide another route.

An AMC can package an actively managed strategy into a single bankable security with its own ISIN. This may allow eligible investors to access the strategy through more familiar investment and custody channels without having to establish and administer the underlying derivative positions themselves.

The structure does not remove investment risk, nor does it guarantee that returns will precisely offset a company’s physical diesel costs. The relationship between the financial instruments and the purchaser’s actual fuel exposure must be carefully assessed. Currency risk, basis risk, liquidity, costs and the suitability of the strategy remain important considerations.

However, packaging a specialist strategy into a recognised security can reduce some of the administrative barriers that have traditionally limited access to sophisticated commodity-risk management.

Coherent Commodities’ fuel-hedging approach has been structured in this manner with the support of Orpheus Capital, combining Coherent’s commodity-market expertise with Orpheus’s ability to transform a specialist strategy into an investable format.

From reacting to fuel prices to managing them

The present diesel shock is a reminder that fuel is not simply another line item in an operating budget. It is a source of financial risk that connects geopolitics, currency markets, supply chains and corporate profitability.

Businesses cannot control wars, refinery disruptions or international oil prices. They can, however, reconsider how they prepare for the financial consequences.

The lesson from both the 2020 oil-price collapse and the 2026 diesel-price surge is that a hedge should be judged by more than whether it reduces volatility. It should be assessed according to whether it reflects the actual commercial needs of the business.

Fuel consumers require protection against damaging price increases without automatically surrendering the benefit of falling prices.

The future of fuel-risk management is therefore not about keeping the brakes on permanently. It is about developing a more responsive braking system—and ensuring that businesses can access it before the next price shock arrives.

This article is provided for information and discussion purposes only and does not constitute investment advice, an offer or a solicitation. Hedging and investment strategies involve risk. Their suitability depends on each investor’s or business’s circumstances, objectives and underlying fuel exposure.