As it stands, value-at-risk (Var) may have had its day in the energy industry. Developed mainly for use in financial markets as a single-figure measure of risk, its methodologies were embraced by the new breed of speculative energy trading houses. Not only did misuse and misunderstanding of the measure by such traders give Var a bad name, but also the industry shift away from pure trading to more asset-backed approaches means Var is much less appropriate to energy company operations.

Martin