MyGallons? Maybe.

I certainly like the idea of MyGallons, which is that you are able to pre-purchase future fill-ups of gasoline at today’s prices (though this is not a “future,” the company is at pains to tell you). I presume it means that they are buying futures, however. While betting on the fact that gasoline will be going down might be a good way of providing a downward pressure on prices, by hedging future increases, this contributes, in some small way, to the speculation that is driving gasoline prices up.

So, what are the problems? Well: it’s a start-up. Leaving aside the possibility of fraud, it might just end up being mismanaged, and given that they are in a position to deal with a lot of cash flow right out of the gate, this is a problem. Nowhere on the site does it indicate precisely the process by which they are buying fuel. If they get the balance wrong, and don’t hedge fuel prices correctly, there is always the possibility of a graceless exit, leaving consumers holding worthless IOUs.

Also, they determine your purchase price by where you live. I live in Manhattan, but have only purchased fuel here once or twice over the last several years. The closest station is charging $4.33 a gallon for regular, and as you go downtown, the price creeps up toward $4.75. I don’t know if they average by zip or by region, but either way, the price they assess for me is likely to be silly. Across the bridge in Fort Lee, New Jersey, regular gasoline is going for $3.95. I usually fill up somewhere in Connecticut, which is between the two in terms of cost. The problem is that if I buy gasoline at Manhattan prices, I’m already paying more of a premium than I would otherwise.

Secondly, while my car is not as much of a fuel hog as some (and yes, I considered a Prius, and it looks like it would have been a wise decision), it does require premium gasoline. The agreement says that they tag on 30 cents a gallon for premium, but it’s not yet clear whether you buy premium gallons, or they make the adjustment when you purchase gas. They apparently make a lot of adjustments when you purchase, according to the type of gas, the locale in which it is purchased, changes in taxes, etc. As a result, it’s difficult to predict exactly what you will be paying for gasoline. If it were a simple matter of five gallons purchased now results in five gallons of gas in six months, that would be great. As it is, there appears to be a lot of wiggle room on their end.

Finally, they are launching at an advantageous time for them. Historically, fuel prices peak around August and then tend to depress through the end of the year. Hard to say, in this overblown market, whether that will have any effect at all.

All that said, it seems unlikely that we will see a long-term drop in gasoline prices. The US has long enjoyed ridiculously low fuel prices, and I suspect that $5 a gallon fuel (or more) is not only inevitable, but here to stay. And I am locked into a six-hundred-mile-a-week (at least) commute. So, all the above caveats aside, I figure I’ll give them a try, and report back here how things go. I won’t see my fuel card from them for several weeks, and I probably will not make my first fuel purchase until September or October, when prices may have dipped a bit.

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One Comment

  1. Phil
    Posted 7/3/2008 at 10:22 am | Permalink

    Read the comments on the LA Times Blog. Looks like all of the details and an in depth investigation took place and details are posted in link below. The outlook for mygallons isn’t looking to good. Looks like a scam.–2146/

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