It looks like $4 gas has finally arrived. The Seven-11s at Abrams and Richmond and lower Greenville by the Whole Foods were 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.
