You, Too, Can Hedge Fuel Prices!
from the farm-to-market dept
A new startup is trying to cash in on the pervasive belief that gas prices are on an inexorable upward climb. The company, PriceLock, will allow consumers to buy gasoline in advance, locking in today's gas prices for up to two months. In other words, the company will let drivers hedge their fuel prices the way airlines do with jet fuel -- sort of. The difference is that airlines don't lock in prices by buying up fuel way in advance. Instead they buy contracts that allow them the option to purchase fuel at a given prices at some date in the future. If the price of jet fuel has actually dipped, they're not compelled to buy it at the price they locked it in at. In this case, drivers are only protected against an upswing; if the price of gas falls over the next two months, then they'd appear to be out of luck, having already bought gas in advance at a higher price. Really, this kind of business only works during periods of time when gasoline prices are moving relentlessly higher (as they are now). Under normal conditions, nobody is going to buy gas in advance or attempt to anticipate market swings. Offering consumers a way to hedge their exposure to higher gas prices isn't a bad idea (though this could probably be accomplished satisfactorily simply by buying the stocks of oil companies), but this system isn't likely to work.