I think those arguments are completely wrong. Here’s why: A company could buy crude oil on the open market and store it away somewhere. Unrefined crude does not degrade like gasoline and presumably the price of refined gasoline is proportional to the price of crude. So, a customer pays the company to acquire an amount of crude oil at today’s price, then when the customer needs gasoline, an amount of crude is sold off. The proceeds of the sale are given to the customer to be used to purchase gasoline.
This is just one example of how it could work without reliance on a futures market.
But that ignores the cost of storing the crude, keeping the storage tanks up to code, inspections, keeping staff around to handle all this. It only makes sense on a large scale, and with only extremely limited transactions. Something like the Strategic Petroleum Reserve.
You are right, it could be done, but not at the price and scale you are talking about. For someone to do this they need to make more profit then they could just turning the crude around on the open market. Since the chance is that the price of crude will rise at least some point in the near future, you’d have to be willing to pay a significant premium for this service, which kind of defeats the purpose.
The word you are looking for is contango. Here’s a article from Bloomberg where oil companies are doing pretty much what you’re thinking. Of course they are being careful and using futures to lock in their prices since they are going to all the trouble of renting supertankers, security, insurance, etc.
The main problem I see with your idea is volume. You’ll have to be willing to buy a large quantity of oil in order to find a company to take the other side of your trade. Even a lifetime supply of gas for one person isn’t enough. I suppose there may be companies that pool a bunch of people together and charge a fee for their services. It seems a lot easier simply to trade futures but that’s just me. The futures market is there to make these kinds of transactions easier and more streamlined.
Does deisel store well longggg term, particulary if carefully stored?
As for using futures, as others have noted, its probably not possible to lock in todays low prices.
But there is probably a significantly higher price you could sort of lock in. So if gasoline REALLY skyrocketed, you’d be sitting pretty. But until then it would be the equivalent of you paying dollars more per gallon than everybody else.
As some have noted, you would probably be much better off just wisely investing that big wad of cash instead.
You could invest it in companies whose share price tends to be tied to oil prices - say, for example, oil companies. You plan to sell enough shares each year to cover your gasoline costs. Those shares should be up when gas is more expensive. (Though there are some good reasons why they may not fluctuate as much as the price of gasoline does, and there are other factors that affect their price.)
As has been noted, the cost of storing a commodity (especially a perishable one) is usually high enough to make this unattractive. Exceptions would be high-value non-perishable things like gold and silver. But even these must be protected from theft (at some cost) and represent capital that is tied up, earning no interest…
The furthest-dated contract is for delivery in December 2017, price quoted is $76.45. So, with oil currently around $40, you could in theory hedge against prices rising by more than 91% over the next 9 years, or 7.5% per year.
So you couldn’t lock in today’s price, but you’d be quids in if the price went back over $100.
#1) Assumptions about future oil prices are simply that - assumptions. There’s absolutely no guarantees. Remember that Chrysler (I think) recently ran a promotion where people buying a car could get a guarantee of gasoline at only $2.99/gal.!!! Notice, by the way, where Chrysler is right now, and where gasoline prices are.
#2) If anyone tells you that they can predict the future of ANY market over a long period of time, doubt them. As an object lesson, you might look to our current economic condition, the investors who knew a sure thing, the number of economists who could not predict where we are, the number of financial advisors who do not make a lot of money, etc. etc.