Canadian Money Forum banner

Hedging (locking in) gasoline price

5K views 39 replies 18 participants last post by  Ponderling 
#1 ·
Is anyone else thinking of hedging current gasoline prices, locking in current prices? I'm considering pre-buying several years worth of gasoline. I would then sell off UGA as I consume gas at the pump.

The following charts show that UGA (a gasoline ETF) has tracked gas at the pump very well. The top chart is UGA valued in CAD, and the bottom chart is the Gasbuddy 3 year Canadian gas price average.

20172

20173
 
See less See more
2
#3 ·
Ag Driver, you might want to go to GasBuddy and first pull up a chart of the gas price in your region. I posted the Canadian average, but I wonder if a certain city's gas would track UGA as well.

There's also the issue that UGA has a high fee (0.75% I think) and does not guarantee perfect correlation. So though it would mostly offset the movements of gas at the pump, it's neither a perfect offset, nor "free".
 
#5 ·
I have often wondered why gas stations cannot sell you as much gas as you wish at the then current price and just give you a credit, again in gallons, for use in the future. Hec, I would probably buy $1/2,000. now. Shouldn't pose a problem for the gas company as they could do a hedge. Good thought James
 
#8 ·
Yeah, that's kind of the problem. Even in peak driving months with road trips, I still only spent around $120/month and my full year expense is maybe $1000.

I suppose I could pre-buy 2 years worth, about $2000. That starts to sound more worthwhile. If gas went up 50%, that's a $1000 win.
 
#9 ·
It would only make sense to me if I had free ETF trading and UGA qualified. I don't use enough gas, even in my truck, to make this worthwhile, I don't think. With $10 trades, it definitely wouldn't. If I used a lot of fuel in a business -- delivery or taxi or aircraft -- I could picture hedging.
 
#12 ·
The only hedge I can think of is to buy a refiner like Suncor or Valero, who make more money on the refining margin. Those stocks will go up when people start driving again and they can get back to a more normal margin.

People are incredibly irrational over gas prices. For most people, it is not even in their top 5 expenses and sometimes top 10 expenses. And people almost never change their lifestyle when prices go up or to prepare if prices go up: vehicle choices, driving habits, or driving styles, all of which can result in 50-75%+ savings. The amount of complaining is overweight to their own actions and actual economic impact.

Why shouldn't I drive my 3000 kg SUV/truck 140 km/h on the highway and slam the gas at every intersection, those oil companies can suck it, ripping me off.
 
#13 ·
People are incredibly irrational over gas prices. For most people, it is not even in their top 5 expenses and sometimes top 10 expenses.
That's true. It's amazing how much people complain about gasoline prices when the price at the pump had not even increased in 10 years. And this was before the recent crash.

I always hear people complaining about price fixing and gouging, expensive gasoline. But a price that is flat over 10 years is hardly a problem.
 
#15 ·
Preselling gas makes little sense. There is the delivery problem, and the storage problem etc.
Futures with a "take possession" take make more sense, but I could imagine at the retail level the gas going negative, which I'm sure would cause some consumer protection and image problems.

I think trading through an abstraction (like an ETF, options etc) makes more sense for hedging.

Personally, my gas is a small expense, I drive a small fuel efficient car. I spend more on fruit than gas, flipp and price matching give me much better ROI.
 
#24 · (Edited)
Is anyone else thinking of hedging current gasoline prices, locking in current prices? I'm considering pre-buying several years worth of gasoline. I would then sell off UGA as I consume gas at the pump.
I don't really consume enough gasoline for this to have been worthwhile, but I'm revisiting this post to see how well the "hedge" would have tracked the price at the pump.

Back in May 15, 2020
Gas price = $0.90 CAD
UGA price = 15.60 USD x 1.411 = 22.01 CAD

And now Feb 1, 2021
Gas price = $1.124 CAD
UGA price = 27.42 USD x 1.283 = 35.18 CAD

So Canadian gasoline since then is up 25% and the UGA hedge would have been up 60%. Hmm... I guess they don't track too well at all. Maybe this has to do with changes in Canadian refining capacity over time. I was hoping UGA would track the price at the pump better than this.

Obviously, in hindsight I wish I bought those UGA shares. This gasoline fund has actually performed much better than the stock market and even energy stocks (like XLE, XEG) since then!
 
#31 ·
Nice time to drive a plug in hybrid, and have a cache of gas at home.
I have a standby gas fueled generator that sits out behind my shed for the rare winter power outages.
There is a shelf that sits in the shade that holds about 85l of stabilized gas in gas cans.

Usually rotate that to fresh fuel every May. Looks like we will get through that cache a bit earlier this year, and tins will sit empty til the fall on the hope this current mess will be over by then.
 
#34 ·
Nice time to drive a plug in hybrid, and have a cache of gas at home.
I have a standby gas fueled generator that sits out behind my shed for the rare winter power outages.
There is a shelf that sits in the shade that holds about 85l of stabilized gas in gas cans.

Usually rotate that to fresh fuel every May. Looks like we will get through that cache a bit earlier this year, and tins will sit empty til the fall on the hope this current mess will be over by then.
A hybrid will never be a net win. Far too complex. I bought a Tesla 3. Super simple. Almost no maintenance. Very low depreciation (I can sell it for $5k more than I paid for it 6 months ago so it's appreciated so far). I track what I spend on electricity charging at home, Superchargers, or other chargers. I average between $35-$50 in power per month. That will go down when I get a proper 220v dedicated line since 110v is so inneficient when it is cold out.
 
#38 ·
Boy, hindsight sure is 20/20.

If I had bought 5,000 CAD worth of UGA when I started this thread (gasoline seemed really cheap) it would be worth 25,000 CAD today!

It's true that I wasn't going to consume that much gasoline directly with my own driving, but what I failed to consider was fuel/gas prices embedded in all other consumer goods.
 
#40 ·
Yes, I do have the ability to run a plug in charger at the office.

But my round trip to work when I am at the office is only 22km.

Usually about 2.5kWh's of energy.

Hardly worth it so unless winter when energy consumption for ancillary loads like seat heat, and minimal defrost do I consider taking my plug in charger with me and plug in at work.
 
This is an older thread, you may not receive a response, and could be reviving an old thread. Please consider creating a new thread.
Top