Suppose someone came to you with the option to buy 30 gallons a month for 12 months at 50 cents higher than the current price. So if gas is $3.50/gallon, you would be able to buy 30 gallons a month every month for a year at $4.00/gal. Would you do it?
If not, is there any premium over current prices you would be willing to do it?
No, for the same reason that I don’t play the petroleum futures market. I am not informed enough to make good investment decisions in that area.
On average, I believe that I’d be much better off taking the extra $0.50/gal I would spend on gasoline and putting it in a CD or an index fund.
In addition, gas is not a large enough part of my expenses for me to need insurance against a price rise (which is basically what this is). If gas went up to $10/gal, the price I pay at the pump would only make a small impact on my lifestyle (and probably one for the better: I’d ride my bike more). Obviously, the trickledown effects of such a change would affect me, but this gas insurance wouldn’t stop that.
I would not, simply because gas prices fluctuate too much. There’s no guarantee that gas prices will rise to over $4 a gallon, however likely it may seem. I’ll take my chances.
I have a car that gets good mileage, too. That’s a factor.
NBC Nightly News reported this evening about a gas bank in St. Cloud, Minnesota. The bank started in the early 1980s and still has about 300 members paying less than a dollar a gallon for gas, and thousands of members still paying under two dollars a gallon for gas.