MyGallons.com Lets You Hedge Against Rising Gas Prices
A year ago, gas was averaging about $2.97/gallon. Suppose you could go back in time and buy gas at that price and then use that gas today, by-passing the $4+ gas we are all currently paying. Well, that is what www.mygallons.com
promises to do.
When you sign up and pay the membership fee ($29-$39/year) you are given the ability to buy gallons of gas at today's prices for use in the future, via a debit card that is accepted at most gas stations. By doing this, you are essentially betting that gas prices will go up in the future. In the investment world, this is known as hedging.
For example, say you buy 100 gallons at today's market price of about $4.09. Now if in a month gas has gone up to $4.30/gallon, you would be able to buy that more expensive gas at the cheaper price you paid a month ago, saving $0.21/gallon. When you choose to take advantage of the cheaper gas you bought is up to you.
So what's the catch? The most obvious one is that if gas prices don't go up, you could be left with a debit card full of gas that you over-paid on. I think most people would be of the opinion that gas prices are going nowhere but up. However, how many of us are willing to essentially bet on it?
The second problem is that if you use any grade of fuel other than regular, you will pay an additional amount on the higher or different grade of gas. For example, if your vehicle requires premium unleaded, you will be charged an extra $0.30/gallon over the price that you locked in your gas at. Around here, premium generally runs only $0.20/gallon more than regular. So gas prices would have to go up at least $0.10 per gallon higher than what I initially paid before I see any savings.
Finally, what if this company doesn't make it? What happens to all the money the collected? The money is held in an escrow account and the owner told me that, if the company goes out of business or declares bankruptcy, the money in the account will be returned. Both my father and brother are attorneys and they told me that as long as the MyGallons.com attorneys set up the escrow account or trust properly, then the money should be secure from creditors.
The company intends to make their money, and to hopefully stay in business, through the collection of membership dues and advertising on their website and by means of opt-in e-mails and text messages sent to their members.
So is it worth it? That is the million dollar (or gallon) question. I am pretty risk adverse when it comes to money issues, so even though I am certain gas will be going up in the future, I am not sure I am ready to bet on it yet. In addition, my vehicles require premium, and the surcharge puts the benefit at a disadvantage. Even without the former issues, I would still feel more comfortable if the company had a longer track record of success. So for now, this is not for me. However, if this company can show longevity, I may very well reconsider.
What about you?
- Posted by
- Lee Scott July 3, 2008, 3:28 AM
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- Fuel Economy
Interesting concept. Not sure I'd want to be one of the first ones in. It has gone up $1.20 in the past six months. Could have saved me about $500 in a year. But I'm not convinced it will continue to go up that quickly. Some speculate that the bubble will burst and while it won't fall below $2 ever again, it may return to $3, or at least not go up again for quite a while. I don't want to drop $2000 in cash right now to pre-pay a year's worth of gas, just to find out what will happen.
Maybe if I had tons of cash laying around, and was convinced that this concept was legit and I would not lose anything, I would load up a debit card for like $20,000 for the hell of it. But I suppose if I was that rich I wouldn't really care about gas prices in the first place.
Rather than paying for this service you could just by a Chrysler vehicle and get the $2.99/gallon gas card.
I really don't think gas prices are going down any time soon, but I couldn't bring myself to pay for this service. If saving money is the ultimate goal there are other ways to save money on gas. But for some, it might be attractive.