Site Lets Small Firms Hedge Fuel Costs

NEW YORK (TheStreet) -- Small businesses hurt by rising fuel prices can follow a risk-management strategy once available only large companies.

Pricelock offers fuel price protection through what is essentially an insurance policy. It is able to offer the strategy by grouping small businesses, cutting costs -- it is done entirely online -- and working with investment banks.

The Pricelock website lets business owners hedge against rising fuel costs; clients pay a fee that protects them when prices rise above the maximum they're willing to pay.

"Essentially we actually aggregate demand from small customers," says Naveen Agarwal, Pricelock's chief operating officer.

How small? Client companies have as few as three trucks or five pickups. As long as a company is exposed to increased fuel prices, they can use the online service, Agarwal says. The strategy has eluded smaller firms in the past, although larger consumers of fuel -- including the major airlines, with the exception of US Airways (LCC) -- hedge.

"We hedge to protect against volatility," said United (UAL) CEO Jeff Smisek on Tuesday at the J.P. Morgan transportation conference. "It's an insurance product. It comes at a cost [but] has value. It's worth doing."

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