It looks like $4 gas has finally arrived. I saw Seven-11s at $4.009 and $4.019 for regular over the weekend -- though most of the stations I drove past in my decidedly unscientific survey were stuck at $3.999.
Which raises this question: Is it financially practical for individuals to hedge against higher prices, in the same way big companies do? Southwest Airlines, for one, credits much of its success, despite rising fuel prices, to hedging. This means Southwest buys fuel now and takes delivery of it at a later date in an attempt to get a better price. (Here is a much better and complete discussion of the futures market and how it works.)
That's the theory behind MyGallons.com, which sells debit-like cards that drivers redeem for gas. In other words, I give MyGallons $100 now (plus the fee it charges to sign up and to reload the card), and it sends me a card that I swipe at the pump when I fill up. I've locked in $100 worth of gas at $4 a gallon, no matter what happens to the price of gas.
So does MyGallons make sense for those of us who don't run airlines that buy millions of gallons of fuel a year?
The answer, not surprisingly, is maybe (and this doesn't take into account what you'll lose if the price of gas goes down or if the company goes belly up):
• Can you afford to buy hundreds of dollars a gas at a time through MyGallons? Or is there a better use for your cash?
• Can you afford to use your credit card to pay MyGallons? If you're paying credit card interest on your MyGallons purchases, you may not save much.
• Do you drive enough to make any discounts pay off? I buy gas once every two weeks, so it probably doesn't make sense for me to tie up hundreds of dollars in this kind of program. One reason companies like Southwest can hedge so effectively is that they can predict fuel use and take advantage of it in a way individuals can't.
One other note: The people at MyGallons emphasize that the service they sell is not hedging. You're buying pre-paid gas. They have to buy futures to make the system work, so the loss is on their end, not yours.
Does anyone do homework anymore before writing or publishing a story? Looks like the answer is NO.
Here are the problems I see with mygallons.com site.
They state:
2000 members
Soft Launch in January
Problems:
Registered Domain in March
Registered company in April
Got SSL Certificate 2 weeks ago (Not possible to run credit cards without it)
Have testimonials on their site (Not possible since no site, no members and it takes 1-6 weeks to get card)
Site went live last week
Conclusion:
Not too good. They are not being honest and truthful. Make your own conclusion. Do I feel safe sending them my hard earned dollars, absolutely NOT
Posted by: Kim | July 01, 2008 at 03:01 PM
To clarify a few points that the reporter may have misunderstood. MyGallons ran a pilot program starting in April of 2008. The soft launch was June 23, 2008. The official launch was June 30th. Ironman's comments and conclusion are based on a these inaccuracies. The pilot program transactions were not conducted through the http://mygallons.com site, this takes care of the first three problems. The testimonials are accurate as the pilot program has been running since April. We are being honest and truthful, unfortunately we are not provided with the opportunity to fact check nor edit reporters before they are published.
MyGallons Support
Posted by: MyGallons Support | July 01, 2008 at 06:42 PM