We can do ths with heating oil, and gas is sold on the futures market. Why can’t the public buy a set amount of gas for a certain price?
So much cost for so little added benefit. The average price per gallon would be much higher under a fixed price scheme because the dealer would need to profit. Even with higher prices, there just isn’t a lot of room for the dealers to make any money. They would need to correctly speculate on the price of oil/processing (or charge so much more that normal fluctuations wouldn’t matter). The amounts of gasoline involved are too small; commodities require large volumes to profit. Businesses, unlike individuals, can get better rates on loans if their fuel needs are hedged. The point of sale, gas stations, are privately managed and sell the fuel of different companies. Imagine the accounting involved so that individuals could buy from any gasoline station, unless you think it could be delivered, which is a whole other nightmare.
Just a WAG, but isn’t gasoline a much more hazardous substance to store in large quantities than home heating oil?
I imagine there would be local ordinances regulating this.
I’ve thought about this before as well - maybe not buying large quantities and storing them at home, but maybe in the form of prepaid gasoline cards or vouchers at a fixed price per gallon. For example, the cards would be good for 20 gallons and then the price of the card would fluctuate based on current prices. I guess there would be a premium over the current price but it would be nice to load up on the cards (if you could afford to) when prices dipped. I guess individual gas stations don’t do it because, as said before, their inventory is supplied by the bigs and they’re as tied to the price as we are. But for some of the stations that are owned by big companies, it’s interesting that they don’t offer it. They could easily hedge the amount of cards (gallons) sold at current prices and still have increased short term cash inflow that they could use to invest or whatever. Plus the added benefit that to redeem the cards you have to use their gas stations…
Probably, in a climate of increasing prices it’s not worth the hassle. And, not living in the US, I’m not sure that some companies don’t offer something like that. Do they?
Cheers, Powers
You ceratinly can buy a futures contract and take delivery on it. Remember though, you’re buying 42,000 gallons and you’re going to have to pick it up from an exchanged-authorized center (the most liquid contract is NY Harbor, which, unless I’m mistaken is in NYC, I believe there’s some in LA as well). Assuming that you purchased a July contract at the clost yesterday, by the time you took delivery on it, you’d owe: $56,830.20 plus negligble commissions, exchange fees and etc.
In order to take delivery, you’d have to 1) make arrangements to pick it up and 2) make arrangements to store it. Both are pretty costly for an average person who doesn’t have any of that infrastructure in place (besides, I dobt that you can convince the Zoning Board to grant you a variance to allow you to keep a 42,000 gal tank on your property - at least in these parts, there are some pretty heavy environmental rules about buried tanks and damned if you can keep it above ground).
In other highly-volatile industries like large-quantity paper, there are a variety of price-insurance policies that will allow you to pay an average price despite what the market does (i.e. if you settle on a price of one dollar per unit and the market value of that unit is 1.05, you only pay the dollar, but if the price dips to .80, you’re still paying a dollar). That’s for bulk purchasing though (i.e. millions of dollars per year) and the paperwork that would be required for something as realtively small like gasoline wouldn’t be feasible given the amount of people who drive, but you can always talk to your local service station I suppose.
IIRC, priceline.com actually tried this - you got a credit-card-like card from them which would work at participating stations for fuel at prearranged prices.
It didn’t last long, I’m not sure why - perhaps they had trouble getting into the gas companies’ networks, or perhaps consumer response was sparse.
Let’s say a person were to buy a gas card – let’s say 100 gallons at, say, $1.75 a gallon. That would have been a pretty fair deal in this area about six months ago.
Now, with gas prices pushing $2, I would think that the gas stations (and oil companies) would be taking a beating on those gas cards.
But if gas were to drop to $1.50 a gallon, what idiot would use his gas card? He’d just purchase with cash, and hold onto the card until gas reached $1.76 or higher.
I can’t imagine this being a sound business deal, unless the cards had an expiration date on em. Then I wonder why someone would speculate on gas if they knew that they had to use all the value of the card within the next month or whatever.
Well, there is buying in bulk. You know those farm fuel tanks (like this), farmers usually buy gas in bulk but at a lower price, of course.
I know it really isn’t feasible in the city, but you get what I mean. 
I would assume if such a card came about the fuel would have to be used by a certain date, if it was to go longer then perhaps the card can be prorated to give a new per gallon rate based on curent prices.
He already payed for the gas when he bougt the card and continues to “pay” the lost interest on the money invested upfront. This way breaking even would turn harder and harder while he is waiting. Meanwhile the issuer of the card can use the money and profit from the deal.
This would have a certain effect on prices (smoothing the extremes a bit) but it could definitely work.
I don’t understand what “lost interest” you’re talking about. Are you thinking that someone would purchase a debit card and then be charged interest against the value of that card? What a bad deal.
Yes, that would be a very bad deal. Even if it’s not as bad as that, there is still an effect even if you don’t take on debt. This is hardly noticeable for smaller sums, so let’s exaggerate a bit:
Say I have saved a nice sum of money and I notice that I could buy a life’s supply of gas (or any other good) at once. It would last for decades, but I have to pay now. Even if I buy at an acceptable price this can be a very bad idea because I sacrifice all interest that I could have earned in the years to come. It only makes sense if I get some compensation for the lost interest. In the case of gas this would happen if the price rises on average at a rate that is higher than my interest rate.
For the individual under realistic conditions the effect is minimal but the general principle stays the same and on a larger scale (e.g. for the issuer of such a card) it can make a difference.
We did something like this back on the farm.
We had a large gasoline tank (500 gallons?) out by the machine shed. We would buy gasoline when gas prices were down. When they went up, we just waited for them to come down again before buying more. On our farm, we could go several months from a full tank, and prices almost always came down sometime in that period. So we sort-of had a fixed-price stock of gasoline available.
(In Minnesota, this gasoline was restricted for farm implement use (because it was exempt from the highway tax on gasoline). So you couldn’t use it in your regular cars or pickups, unless you paid the taxes on the portion used in passenger vehicles.)
Yes, gasoline can be quite dangerous. It evaporates much faster than heating oil (which is essentially diesel) and gasoline vapors are very very flamable and explosive when ignited in confined spaces.
Diesel on the other hand, needs to be pre-heated to ignite. You can drop a lighted match in a pool of diesel (don’t try this at home!) and the match will be extinguished. Try this with gasoline, and the match won’t really have to touch the liquid; the vapors some inches above the surface will ignite instantly.
Also, depending on the local laws, fuel tanks above a certain capacity have to be underground (buried) and properly registered to the local authorities.