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Answered Question
M$1
December 22, 2008 08:38 PM
Is there a way for a consumer to lock in the current gas prices for the next couple of years?
Said another way, can I buy $2,000 worth of gas at current prices now so that when they go up to $4-5 again next year I'm getting 50% off?
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| December 22, 2008 11:13 PM |
This is what I had to say about that service ( and others like it )
The concept is theoretically possible. They will be using futures contracts to hedge their cost in case the price of oil increases during the time they have obligations to provide fuel to their customers.
The site (mygallons.com) explains it like this:
Q Is my pre-purchase of gas from MyGallons safe? Will my gas be there when I need it?
A Your pre-purchases of gas are safe and secure with MyGallons. Over 80% of your pre-purchase amount is placed in an escrow account and invested in money markets and U.S. Government backed notes. The remaining balance is utilized for financial transactions to accomodate for gasoline price changes.
Since the "financial transactions" are highly leveraged, 20% of the total is a reasonable ball park estimate.
Right now they can buy a futures contract on crude oil for April delivery for about 42.00. You will see why I chose that contract in a few lines.
One contract of oil consists of 1,000 barrels. They will not actually take delivery of the actual oil. They will sell the contract before delivery.
1,000 barrels of oil is 42,000 gallons. The contract price is 42.00 so they must pay $42,000. See? $1.00 per gallon. But, they will be able to buy this contract by putting up 5 to 15% of the purchase price and borrowing the rest.
If oil is selling for $142.00 next April, they will sell the contract for approximately $142,000.00 and put the 100,000 into the fund to furnish you with gasoline.
Really neat Huh?
Only one thing to remember. That is the same technique that was used by Bernie Madoff and many of the hedge funds.
Then the further question. What happens if they hedge oil at todays price and it goes down. Back in the early 80's it dropped from $50 to $10 and took about 20 years to come back up.
The same relationship would mean that oil could conceivably fall to $30 and stay there for several years. ( That is NOT a prediction)
Source(s):
www.mygallons.com
CNBC
Source(s):
mygallons.com
CNBC
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mrgunn
December 23, 2008 01:09 AM
And as we all hopefully have learned, leverage risk is damn hard to predict. Ya pays yer money and ya takes yer chances.
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Other Answers (17)
December 22, 2008 08:45 PM
Not sure about gasoline prices. I was thinking if the airlines can do it (Southwest) why can't the general public. However, I do know it can be done for Natural gas at least for a year at a time. Check with your Natural Gas provider. p.s. admittedly not an answer to your question but wanted to get the word out about natural gas.
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December 22, 2008 08:46 PM
That's technically hoarding gas. I would NOT recommend this! Read this post on BoingBoing: http://www.boingboing.net/2008/06/09/hoarding-gas-is-an-e.html
Source(s):
http://www.boingboing.net/2008/06/09/hoarding-gas-is-an-e.html
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December 22, 2008 08:46 PM
Jason Wrote about a site called http://www.mygallons.com/ looks like it does just what you ask.
http://patphelan.net/hedge-your-gas-prices/
Source(s):
http://patphelan.net/hedge-your-gas-prices/
http://www.mygallons.com/
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December 22, 2008 09:00 PM
- Fact Refuted
Just FYI Mygallons.com is not live yet.
Its a very cool ambitious project, but I'll hold my doubts until its up and running.
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Its a very cool ambitious project, but I'll hold my doubts until its up and running.
December 22, 2008 08:48 PM
Yes Gasoline Banks have been cropping up all over the country Check out fuelbank.com
The Fuel Bank, based in Ft. Meyers, FL, is still laying the groundwork for a nation-wide prepaid gasoline network, but once established it promises customers the ability to pick-up their prepaid gas at any station in the nationwide network.
Since the mid-1980s, First Fuel Bank customers in the St. Cloud, MN area have been able prepay for their gasoline and lock in the price of their gas – no matter what gasoline prices do in the future.
Source(s):
http://www.wisebread.com/the-bank-of-gasoline-0
http://www.fuelbank.com/
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December 22, 2008 08:48 PM
Yes, use http://www.mygallons.com Their FAQ says there is no time limit on pre paid gas you buy from them. there is an annual fee (about 20 dollars). Looks like you basically then have an account with a gas debit card you can add money to at any time.
Source(s):
http://www.mygallons.com
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December 22, 2008 08:50 PM
Given the phrasing of your question, I'd have to say the only possible way would be to buy 2,000$ worth now and store it in your own tank for future use. BUt this is improbably and I imagine the gas at some point would lose its quality. Quickly. The only other way then would be to buy it at the same price in the future. And this means that either you rob a gas station or make some sort of mass-purchase agreement with the providers. Seeing as how you're not an airline company, I don't think you'll be able to do that.
So, essentially, no. You, me, and everyone else are SCREWED when prices get jacked back up in summer.
Well, I guess you could try to stop prices from going up.
1) Stop people from bidding / guesstimating above 100$/barrel on the market
2) Introduce a cheap gas-alternative that will severely decrease demand for crude, thus driving down the price.
Source(s):
General news from Digg and Wall Street Journal
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December 22, 2008 08:54 PM
Great article on gas saving practices: http://www.edmunds.com/advice/fueleconomy/articles/119036/article.html
That lead me to the only known gas "bank" in the country allowing pre-purchasing of gasoline:
http://www.firstfuelbank.com/prepaid/default.asp
I think this is an awesome idea and would probably make some serious money if the business model was right.
I thought I had a clever one liner about Jason and his Tesla, but... I decided it's not that clever.
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December 22, 2008 09:01 PM
Gasoline futures I guess it's more of an offset?
Source(s):
http://www.dailyfutures.com/energies/
http://www.wtrg.com/daily/gasolineprice.html
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December 22, 2008 09:05 PM
This is an idea ready to take on a storm. And it could have stabilizing effects on the price of gas as well. As another poster said: invest in everything that promotes alternate energy and lower gasoline consumption as well. It's better to lock in 500 gallons at a price than 1500 gallons at half the price...
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December 22, 2008 09:18 PM
Buy shares of UGA. It's traded on the NYSE and is directly correlated to the price of gas. It's at an all-time low.
Source(s):
http://finance.google.com/finance?q=uga&ie=utf-8&oe=utf-8&rls=o...
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December 22, 2008 09:44 PM
I saw a story on ABC News a while back about a town full of people that started a gas bank. They all bought a ton of gas and put it away in some large storage facility. When gas was at it's high point, they all went there and filled up for cheap, now I'm sure they're probably stock piling again. You could try to organize and start your own gas-bank in your town, or go to a site like this one.
http://www.gasbankusa.com/
Or you could try to buy a hybrid, that way it won't matter so much the next couple of years.
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December 22, 2008 09:45 PM
Several manufacturers are offering gas freeze options if you buy a new car, at least they were at the end of summer. The problem is that the savings on average is not more than the extra you pay for a new car, so it isn't a good deal financially, unless you're planning on buying a new car anyway. Other than that, you could stock up on gas somehow at a good price and store it on your own property in a tank, that way you can freeze the price.
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December 23, 2008 04:02 AM
One way to do it is to purchase an ETF (Exchange-Traded Fund) that tracks the price of oil. The ticker (OIL) is one of these. Investing in this fund is basically hedging your gasoline purchases. When gas goes up, the ETF will rise in value, and you can sell your position to subsidize the amount that you pay at the pump.
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December 24, 2008 03:13 AM
Yea, but what if the price of oil goes down.
In the '80s it fell from 50 to ten and took 20 years to come back.
In the same proportion, it would not be surprising to see it fall to 30.
I am NOT predicting $30 oil but I would not be surprised to see it.
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In the '80s it fell from 50 to ten and took 20 years to come back.
In the same proportion, it would not be surprising to see it fall to 30.
I am NOT predicting $30 oil but I would not be surprised to see it.
December 23, 2008 05:58 AM
Gas prices have gone down, and will not go up to $100+, because they were artificially inflated by speculation (NOT SUPPLY AND DEMAND!). Middle eastern countries are budgeting for under 50$ a barrel. Many airlines are now stuck with higher fuel prices because they hedged/bought their oil at prices higher than current prices. Moral of the story? Don't hedge. http://www.thenational.ae/article/20081203/BUSINESS/51661798/-1/ART
Also, Goldman Sachs famously predicted $100+ oil prices, then predicted $200, then ground fell out underneath everyone, and now they're predicting $30 barrels
http://news.tradingcharts.com/futures/1/9/117784491.html
Second moral of the story? Don't believe the hype.
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