daniel@procarpet
Member
- Joined
- Sep 7, 2008
- Messages
- 3,797
This is a great time to hedge your fuel costs. Airlines do it. Mcdonalds and other companies hedge their food costs. Gas prices in my area are around 1.55 gallon. This is a four year low. If you are comfortable with the price of gas you are currently paying, You can lock in these low prices.
Figure out how much fuel you use on average in a year. Lets say you use 5,000 gallons on average. At four dollars a gallon, your fuel cost would be 20,000 dollars. Gas prices are down and your cost with todays price would be 7500 dollars.
To hedge your fuel cost you can invest in oil futures or buy oil ets such as USO. Invest 7500 dollars in oil etfs. If the price goes up to 3 or 4 dollars per gallon, you will be making money to cover the rise in gas prices. If the price of oil falls even father, you will be saving money at the pump, but loosing on your investment. They cancel each other out. If the price falls further which I dont believe it will you will not benefit from lower fuel costs. Remember you said you were comfortable paying todays fuel cost.
Here is how you can loose money. If you only use 5,000 gallons of fuel per year or 7500 dollars, and you invest a sum larger than that amount lets say a 100,000 dollars and oil prices fall even further, then you would have a large paper loss. If the price goes up, then you would make a killing.
If you like this idea, check with an investment specialist or financial planner. Oil futures have an expiration date. I am investing 10,000 in an oil etf by investing a 1,000 per week for the next 10 weeks to dollar cost average. I am more than comfortable with the current price of gas. If gas prices go to 3 or 4 dollars a gallon next year, I will still be paying 1.50 a gallon.
If you use diesel, you would have to adjust your figures.
Figure out how much fuel you use on average in a year. Lets say you use 5,000 gallons on average. At four dollars a gallon, your fuel cost would be 20,000 dollars. Gas prices are down and your cost with todays price would be 7500 dollars.
To hedge your fuel cost you can invest in oil futures or buy oil ets such as USO. Invest 7500 dollars in oil etfs. If the price goes up to 3 or 4 dollars per gallon, you will be making money to cover the rise in gas prices. If the price of oil falls even father, you will be saving money at the pump, but loosing on your investment. They cancel each other out. If the price falls further which I dont believe it will you will not benefit from lower fuel costs. Remember you said you were comfortable paying todays fuel cost.
Here is how you can loose money. If you only use 5,000 gallons of fuel per year or 7500 dollars, and you invest a sum larger than that amount lets say a 100,000 dollars and oil prices fall even further, then you would have a large paper loss. If the price goes up, then you would make a killing.
If you like this idea, check with an investment specialist or financial planner. Oil futures have an expiration date. I am investing 10,000 in an oil etf by investing a 1,000 per week for the next 10 weeks to dollar cost average. I am more than comfortable with the current price of gas. If gas prices go to 3 or 4 dollars a gallon next year, I will still be paying 1.50 a gallon.
If you use diesel, you would have to adjust your figures.
