System and Method for Generating Revenues in a Retail Commodity Network
Embodiments disclosed herein provide viable revenue models for a service provider that offers price protection on a retail commodity to businesses as well as individual consumers in a retail commodity network. Specifically, embodiments disclosed offer a plurality of revenue flows in which the cost incurred by a service provider to offer hedge positions associated with a retail commodity can be offset in a variety of ways to cover the operating expenses and generate realistic profits. In some embodiments, a revenue model for a service provider in a retail commodity network may be built depending upon whether hedging cost information is generated internally or obtained externally. Such cost may be passed on to a customer entirely, none at all, or somewhere in between. Embodiments disclosed herein further provide a plurality of revenue sources and ways to generate revenues therefrom.
1 . A method for generating revenues in a retail commodity network, comprising:
generating or obtaining hedge cost information as input to a revenue model, wherein the hedge cost information includes costs associated with hedging a commodity on a wholesale basis;
determining whether to pass none, some, or all of the costs to a customer, wherein the customer is an individual user or a commercial entity;
engaging one or more revenue sources specified in the revenue model; and
aggregating a total net revenue per unit of the commodity from the one or more revenue sources.
2 . The method of claim 1 , wherein the commodity is gasoline.
3 . The method of claim 2 , wherein the hedge cost information contain a matrix of strike prices and a matrix of insurance prices corresponding to the strike prices.
4 . The method of claim 3 , wherein each of the insurance prices represents a hedge cost per gallon for insuring against a risk of the customer depleting a virtual gas tank of the gasoline when retail prices of the gasoline exceed the customer's lock price.
5 . The method of claim 4 , further comprising warehousing and managing the risk.
6 . The method of claim 5 , further comprising laying off the risk on an open market.
7 . The method of claim 3 , wherein the matrix of strike prices contains a plurality of parameters including strike prices for fuel grade per gallon, sensitivities, location, and duration.
8 . The method of claim 3 , further comprising determining an amount of the insurance prices to be passed on to the customer.
9 . The method of claim 1 , further comprising determining a range of strike prices tailored for the customer, wherein each of the strike prices corresponds to a certain percentage of price protection coverage for the commodity.
10 . A computer-readable medium carrying program instructions executable by a processor to perform:
generating hedge cost information as input to a revenue model, wherein the hedge cost information includes costs associated with hedging an energy commodity on a wholesale basis and wherein the revenue model specifies one or more revenue sources;
determining whether to pass none, some, or all of the costs to a customer, wherein the customer is an individual user or a commercial entity; and
aggregating a total net revenue per unit of the energy commodity from the one or more revenue sources.
11 . The computer-readable medium of claim 10 , wherein the energy commodity is fuel.
12 . The computer-readable medium of claim 11 , wherein the hedge cost information contain a matrix of strike prices and a matrix of insurance prices corresponding to the strike prices.
13 . The computer-readable medium of claim 12 , wherein each of the insurance prices represents a hedge cost per gallon for insuring against a risk of the customer depleting a virtual gas tank of the fuel when retail prices of the fuel exceed the customer's lock price.
14 . The computer-readable medium of claim 13 , wherein the program instructions are further executable by the processor to perform warehousing and managing the risk.
15 . The computer-readable medium of claim 12 , wherein the matrix of strike prices contains a plurality of parameters including strike prices for fuel grade per gallon, sensitivities, locations and duration.
16 . The computer-readable medium of claim 15 , wherein the program instructions are further executable by the processor to determine an amount of the insurance prices to be passed on to the customer.
17 . A system comprising:
a processor;
a computer-readable medium carrying program instructions executable by the processor to perform:
generating hedge cost information as input to a revenue model, wherein the hedge cost information includes costs associated with hedging a commodity on a wholesale basis and wherein the revenue model specifies one or more revenue sources;
determining whether to pass none, some, or all of the costs to a customer, wherein the customer is an individual user or a commercial entity; and
aggregating a total net revenue per unit of the commodity from the one or more revenue sources.
18 . The system of claim 17 , wherein the hedge cost information contain a matrix of strike prices and a matrix of insurance prices corresponding to the strike prices.
19 . The system of claim 18 , wherein the commodity is fuel, wherein each of the insurance prices represents a hedge cost per gallon for insuring against a risk of the customer depleting a virtual tank of the fuel when retail prices of the fuel exceed the customer's lock price.
20 . The system of claim 18 , wherein the matrix of strike prices contains a plurality of parameters including strike prices for fuel grade per gallon, sensitivities, location, and duration.