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 > Hedging Gas Prices

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DallasSteve

Texas

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Posted: 08/17/22 08:51pm Link  |  Quote  |  Print  |  Notify Moderator

Has anybody thought about hedging gas prices against future rises? I have, a little. Gas prices were a super hot topic when they were about $2 a gallon higher, but I bet people are thinking less about that now. About June I was seeing prices here in South Texas hit $5 a gallon, but not much more. (I know a lot of the country pays a lot more) I've been watching the prices fall steadily here for 2 months and the average is around $3.19 down here. I've even see a station break under $3.

My thinking is I'd like to lock in those prices and not be paying $5 a gallon again. I don't think the major companies offer a buy now/pump later plan, but maybe there is a way to do that in the futures market. If I bought gasoline options they would have a huge time premium that would kill the savings. But futures are different and I think they might work. With futures you are committed to the price at a later date. So if gas prices went down I would save money at the pump, but I would lose money on the futures. It's a wash. And the reverse is true if prices go up. Still a wash.

Anyway, if anyone has more knowledge about that I invite your comments. Maybe it's a really lame idea; that's why I thought about this forum. If it's a good idea I'll keep an eye on prices and I may make a futures trade in my TD Waterhouse account when prices are looking good to me.





JRscooby

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Posted: 08/18/22 04:28am Link  |  Quote  |  Print  |  Notify Moderator

In my tax bracket the best I have ever been able to do is when price is going up fill every time you stop. Going down? Just buy what I need today.

shelbyfv

TN

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Posted: 08/18/22 05:48am Link  |  Quote  |  Print  |  Notify Moderator

Probably the most realistic hedge is a fuel efficient vehicle for our non-towing transportation.[emoticon]

* This post was edited 08/18/22 06:06am by shelbyfv *

QCMan

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Posted: 08/18/22 06:23am Link  |  Quote  |  Print  |  Notify Moderator

A 20,000 gallon tank under the backyard could buffer those price changes a bit. Of course, you would have to mix in your own additive package and ethanol (if you want to decrease your mileage).


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nickthehunter

Southgate, MI

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Posted: 08/18/22 06:27am Link  |  Quote  |  Print  |  Notify Moderator

The answer is yes, that is exactly what the futures market is for; you can lock in a price today for some commodity you need in the future.

So the guy that makes Cheerios, can buy the oats he needs next year today, and he locks in a price he is comfortable with paying for the oats to be delivered next year. And the farmer selling the oats is comfortable with the price he contracts to receive for the oats that he will deliver next year. The buyers and sellers are by their agreement, setting the "market price" for Oats in the "delivery month" of next year.

But the thing is, you will be buying today, at next years "market price"; you don't get to buy next years oil at "todays" price. I didn't look to see if next years market price was higher or lower than today's price.

cptqueeg

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Posted: 08/18/22 06:47am Link  |  Quote  |  Print  |  Notify Moderator

First question is what % is fuel of your budget. If it's 3% why bother w the effort to save some small % of that 3%? And over time it probably evens out anyway so what are the savings long term, probably not much.

If you have a 500 gallon tank in the yard and you can get less than retail price all the time, plus add in the convenience (and risk), that might be worth doing.

ItsyRV

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Posted: 08/18/22 06:49am Link  |  Quote  |  Print  |  Notify Moderator

DallasSteve wrote:

I don't think the major companies offer a buy now/pump later plan, but maybe there is a way to do that in the futures market.

Sure you can do that but for practical purposes, how will your gasoline get into your tank when and where you need it at that price?


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valhalla360

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Posted: 08/18/22 07:52am Link  |  Quote  |  Print  |  Notify Moderator

If you wouldn't invest in futures normally, playing them when you don't know what you are doing it likely to cost you money in multiple ways.

About the only hedging I do is looking ahead on our route with gasbuddy. If there is a significant difference, I'll try to time my fuel stops for those locations. Occasionally, I've gotten as much as 30-50cents savings but usually it's a few pennies difference.


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DallasSteve

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Posted: 08/18/22 09:26am Link  |  Quote  |  Print  |  Notify Moderator

cptqueeg wrote:

First question is what % is fuel of your budget. If it's 3% why bother w the effort to save some small % of that 3%? And over time it probably evens out anyway so what are the savings long term, probably not much.

If you have a 500 gallon tank in the yard and you can get less than retail price all the time, plus add in the convenience (and risk), that might be worth doing.

Most of the year it's around 3%. For a month or two when I travel north in the spring it's over 10%. Then in the fall it's over 10% traveling south. The difference in gas prices might be a few hundred dollars. It wouldn't break my budget. Maybe it's not worth it.

Matt_Colie

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Posted: 08/18/22 10:35am Link  |  Quote  |  Print  |  Notify Moderator

For us it is everything.
Being retired and having zero hope of additional income, and being travelers that specialize in free parking, fuel cost is a major consideration. We stored up want money we could when nothing was open so there was no place to go, but we are about to go off to more rallies that are not free to participate and fortunately there is not much year left.

We will survive, but between this and the abrogation of major companies, this is not what I scrimped and saved most of my life to not enjoy.

Matt


Matt & Mary Colie
A sailor, his bride and their black dogs (one dear dog is waiting for us at the bridge) going to see some dry places that have Geocaches in a coach made the year we married.


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