I realize that prices may continue to fall but I’d be willing to risk it and buy a few thousand gallons now at $1.89. Unfortunately, I can’t store it and paying the storage might defeat the purpose.
Futures? Options? Anything?
I keep meaning to ask a similar question on the investing thread on that other message board. I know you can invest in oil companies, but ISTM, there should be an easy way to say “gas is $2.00, time to buy…now it’s $3.00, time to sell” the same way you can do with precious metals (GLD, SLV, XPD etc). I believe these are all ETF’s but with some of them you actually own it and with others not only do you actually own it, they physically put it aside for you, in a vault, until you sell it. (Of course, unlike gas, when it comes to metal you can actually buy and store it in your house too).
Anyways, like I said, you can invest in oil/gas, I assume you can invest in futures, but I don’t know anything about futures trading, but considering you see the price at the pump all over the place, it seems like it should be an easy trade…seems like it.
Seems pointless to try to store it. Gasoline goes bad after a few months; buy and store a thousand gallons for your ownself, and much of it will be will be wasted.
Think of it this way: the airlines all want to do the exact same thing you want to do. And the airlines can use futures contracts to hedge on price increases. But here’s the thing: you probably want 100 gallons, not millions. Also, a number of airlines are losing a lot of money at this moment with fuel prices dropping.
So I think if there were a simple way to lock in low prices on a commodity for a long time, the airlines would know about it… But it’s clear they don’t.
Well, it declines slightly in quality.
My lawn tractor sees its last action in mid-October. It then starts immediately I ask it to in April. It has done this 11 years in a row.
There are oil ETFs. They are funds, not commodities so you won’t have to worry about taking delivery.
Southwest Airlines did it for years using a fixed-forward contract.
There are a number of web sites saying you can do it, too:
http://www.mygallons.com/
http://www.edmunds.com/fuel-economy/gas-buying-strategies.html
http://desertfuels.com/industry-education/fixed-forward-fuel-contracts/
You can buy futures on gasoline just like any other commodity. You’re not required to take possession of the physical gasoline. The minimum contract size for a gasoline long hedge is something like 42,000 gallons, although I think some markets trade a mini contract for half of that.
That may not be what you’re looking for, but you can use it to make money off a price increase, then exchange that money for gasoline in the future. Money can be used to purchase a variety of goods and services, and is often useful in ways gasoline is not, although in a post apocalyptic Mad Max wasteland, take the gasoline.
Yes, Southwest won big with hedging a decade ago. In recent years, however, this strategy has resulted in them paying more for fuel that almost any other airline.
Here is an ETF: United States Gasoline Fund LP
There are probably others.
In essence, what you want to do is get a long position on gasoline, i.e., a position where you will benefit from price increases so the profits this will generate offset the increased prices you pay at the pump. Since you don’t want to take physical delivery of the gasoline, you’ll need to rely on derivatives - a derivative is a financial contract whose value is “derived” from the value of the underlying commodity, but which can be bought and sold separately, without physical delivery. There’s a multitude of ways you can achieve this. ETFs (exchange traded funds), or ETCs (exchange traded commodities) as they are often called in the case of commodities, are just one way. You can also do it by means of call options or warrants. You can also take out what is called a “contract for difference” (CFD), which is essentially a bet whereby the broker from whom you buy the CFD promises to pay you the difference between a predefined strike price and the current market price; they are popular in Europe, but it seems American financial regulation does not permit CFD trading for U.S. residents. Essentially, any type of derivative can be used to get a long position.
Way back 25+ years ago, in the city where I grew up, there was a fuel “bank” of sorts. It was a chain of just a couple stations locally. Their model was exactly this, with a caveat. You would pay in advance for fuel at the current price per gallon for bulk fuel - I think you could pick how much to “invest.” They would keep track of how many gallons you used - only filling at their stations. Since they constantly turned over their gas like any station, there was no issues with old gas.
The catch was that, if the price went down, you had then paid more for the gas you were getting than the current price. I suppose you could just then fill at any retail station for a lower price if you wanted. But the prices they offered, because you were buying in bulk, were a few cents per gallon less than what retail sold at the current time. Minor price fluctuations (+/- $.05 say) wouldn’t benefit you with buying retail.
I don’t know the exact details because I was a kid at the time, but I remember discussing it with my dad or something.
No idea if this sort of model exists anywhere today.
edit to add - it still exists: https://www.firstfuelbank.com/
Hmm, okay, at this moment it looks as if the “Pre-pay Lock-in” price on that website is considerably higher than their other prices for the same product. For unleaded, per example:
Pre-Pay Lock-In Price (Cash or Check Only): $2.959
Pay At The Pump Price (Credit Card Only): $2.259
Rolling Account Price (Cash Only-Not Locked-In): $2.159
Kinda seems to defeat the point a little…
Perhaps, and buying a future, then selling it for gas money (lol) might be a reasonable equivalent. But how easy would it be to actually take possession of the gasoline that is subject to the future? Certainly, you can’t just drive up to your broker’s office and say fill’er up (or can you?), but how easy is it to actually take physical possession of the product?
Wow. I bet they don’t have a lot of takers at those prices.
Maybe diesel is different. A friend of mine has a hobby farm. He has two tanks that he gets filled with off-road diesel for his tractor and other farm use. Coincidentally, he and his wife drive diesel vehicles. He fills his tanks two or three times a year.
I think it more likely that I simply overstated the issue. Change a few months to a year or more.
Each contract is 21,000 or 42,000 gallons. You would need to be approved by the broker to take delivery (most retail brokers aren’t set up for this). You will need to pay for all of the gasoline before taking delivery. If you fail to take delivery after holding a long futures contract through the contract’s expiration date you could incur a financial penalty in the thousands of dollars. Bottom line, its not for the average Joe.
Options have expiration dates so not a great plan unless you only want to hedge for a defined period of time. Also, they are in the size of futures contracts so you cannot easily sell bits at a time as your need for gasoline hedge decreases the closer you get to contract expiration.
Let’s say one needs @ 10 gallons of fuel a week. With fuel at $2/gallon, why not buy @ $7,000 worth of an etf? Sell 1/14 of the position each six months for 7 years. It’s not a perfect hedge but will provide some price protection. Just make sure the etf does not require transactions of 100 shares.
Diesel has a way longer shelf life than gasoline. On the older blends, the shelf life used to be pretty darn close to infinite. With the newer ultra low sulfur road blends, supposedly that reduces the resistance to microbial contamination so it’s “only” good for a year or two, but that’s still a way better proposition than socking away a bunch of gasoline that’s going to start to deteriorate in a few months.
You don’t suppose he’s running untaxed off-road diesel in those two cars do you? 
If so, the (illegal) tax dodging there far exceeds the likely value of locking in unusually low prices.