New ways to beat high gas prices |
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That doesn't mean the prepay-per-gallon
concept will remain exclusively in the St. Cloud area. Other companies
have taken notice of the concept and are applying it in their markets.
One notable example is the Gulf
Oil retail chain based in Chelsea, Mass. Beginning in the fourth
quarter of 2006, Gulf plans to roll out a pair of plans aimed at
pinning down fuel prices for its customers.
The first program will be similar
to what First Fuel Banks offers. Gulf will allow customers to lock
in gasoline prices for the year, much the same way homeowners in
New England lock in home heating oil prices.
Customers will be able to buy prepaid
increments of gasoline that would be valid for three to 12 months.
When Gulf customers log on to the
company's Web site, they buy a gas card for a set number of gallons
at a set price, say $3 per gallon. Gulf will charge a down payment
of around $1 per gallon, and then the customer pays the remaining
$2 at the pump when he fills his tank.
Beginning in 2007 Gulf will also
allow customers to buy "insurance" against rising gas
prices. For a premium of about 20 cents per gallon, Gulf will cap
the maximum price per gallon at that day's going rate for a fixed
amount of time.
Reception for both programs has
been exceptional, says Joe Petrowski, CEO of Gulf Oil.
"But the proof will be in
the actual sales, and one never knows," he says. "Ironically,
interest could wane with a continued drop in gasoline prices. But
that actually would be the best time to fix your price."
Both Gulf programs will be available
at any of the chain's 1,800 retail stores.
"It is important to remember
that these pricing options are not a panacea for high prices,"
Petrowski says. "The fixed price card will be at the prevailing
price at the time. If you buy timely you will benefit, if you do
not you will not."
Hedging: Venture out on your
own
For the fuel-weary but financially brave, a Web-based financial
market called HedgeStreet offers another way to take the sting off
rising gas prices -- investing in derivatives.
A derivative is an investment whose value depends
on the value of something else; in this case, gasoline.
HedgeStreet's vice president for marketing,
Bill McIntosh, says the site gives customers a new way to fight
back against rising energy prices.
"People might say, 'My gas bill is killing
me. How can I hedge?' and we are offering them an option,"
McIntosh says.
HedgeStreet's offers customers a product they
call "binary option hedgelets." These are contracts that
wager that the price of everyday commodities, such as gasoline,
housing prices or interest rates will either end the week above
or below a given price.
"It's a new and simple way for consumers
to get into markets they didn't have access to before," says
McIntosh. "We offer retail-sized, affordable contracts, make
it very clear your upside and downside for each trade -- and you
don't need a broker to start trading."
In a hedgelet, a trader who thinks
the price of gas will end the week above a stated price can purchase
contracts at that price. If gas prices end up above that stated
price the trader profits. But if gas prices don't hit that mark,
the trader gets nothing and loses the initial investment. (See box
on Page 3 for further explanation.)
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