Buying Fuel in advance

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networkn

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Topic # 160635 14-Jan-2015 10:28

Hi There!

I presume it's not possible to take a "position" on fuel? It would be nice to buy my years fuel in advance at the current rates.

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Reply # 1213621 14-Jan-2015 10:37

You can trade oil futures on the stockmarket, but actual fuel to put in your car your only option would be to buy in bulk, but you run into issues there

a) outlay for bulk storage
b) lifespan of fuel (it loses octane rating over time)
c) location test certificate costs (storing > x litres on site)

For the average person we are at the mercy of the fuel company.

If you're a farmer or business owner (ie trucking company) with bulk storage already in place then I guess its possible.

wellygary

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Reply # 1213630 14-Jan-2015 10:42

Sure, Singapore futures on Gasoline are some of the most widely traded instruments in the world, The only problem is that the min quantity is 1000 barrels, (15,900 litres) :) + you have to pay for delivery

I have not heard of anyone offering a local service in personal customer sized lots,

lxsw20

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Reply # 1213637 14-Jan-2015 10:45

Except fuel goes off after a while so not a great idea to store it for too long.

MileHighKiwi

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Reply # 1213641 14-Jan-2015 10:48

Nice idea but unless you are a commercial business with the facilities to store and pump it I imagine it wouldn't be an option for regular Joe who just has a garage. Can't see my my wife happy to store 3000 liters of petrol at our house either. Or the fire brigade.

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Reply # 1214635 14-Jan-2015 11:23

We keep diesel on the "farm' so yes you can. Not sure I would want to keep petrol though.

frankv

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Reply # 1214644 14-Jan-2015 11:36

I don't think he wants to buy fuel physically... rather a contract to buy fuel at a fixed price at some time in the future. i.e. 'futures'.

As someone said, you can buy into Singapore oil futures, but only on a large scale.

Maybe there's an opportunity to run some kind of web-based petrol futures market for small investors, investing in that Singapore market?

Maybe something like cellphone contracts. You contract with (say) BP to buy (say) 20 litres of (say) 91 fuel for (say) $40 every week for the next (say) 6 months. If want more than 20 litres in a week, you would buy that at the floating rate. If you don't collect 20 litres in a week, you still have to pay your $40. Penalties for early termination.

Or maybe something like Chrisco... You pay (say) $5 per week for (say) 20 litres of (say) BP 91 fuel in (say) January 2016?

Sidestep

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Reply # 1214646 14-Jan-2015 11:37

We're rural.

We use a fair bit of fuel, plus I have freaky survivalist tendancies - so we keep a certain amount on hand.
I'd feel uncomfortable having less than 1000litres of diesel available - that won't run the generators for long during end-of-times!

I have above ground storage - farm tanks- for 1500 litres of diesel and 500 litres of petrol.
We also have 44 gal (200l) drums & jerry cans in our fuel shed.
Most of the farms & orchards around here have a lot more than us.

We have a fuel account in town (50km away) and a 1000 litre fuel trailer for transport/storage.

The whole thing is more complicated than you'd think.

There are regulations regarding fuel storage and transport.
I believe any property larger than 4ha has to comply with the NZ EPA rules among others.

Storing fuel correctly to prevent it going off requires planning.
We try to cycle through our fuel so none is more than 6 months old (diesel) or 3 months old (petrol), use additives and filters to prevent spoilage and water issues, chart our usage & storage to make sure none's escaping.

And.. It hasn't saved me money. I'm still using fuel I paid for months ago.
At least the next load will be at the new prices!

geekiegeek

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Reply # 1214650 14-Jan-2015 11:40

I think you mean hedging like how AirNZ hedges its fuel price which is why they are not lowering airfares with the recent drops as they have already purchased at a fixed price.

When you live your life on Twitter and Facebook, and are only friends with like minded people on Twitter and Facebook, you are not living in the real world. You are living in a narcissistic echo chamber.

My thoughts are my own and are in no way representative of my employer.

timbosan

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Reply # 1214651 14-Jan-2015 11:41

Funny enough I was thinking of the same thing - petrol won't go down forever and common sense says there will be an increase at some point. So I did some research. There is a nice thread http://bishophill.squarespace.com/discussion/post/2430730 that goes into some of the chemical science, and the basic premise is that in a vented 'container' such as a fuel tank (which is vented to allow the fuel to flow and be replaced by air) combined with the metal of the tank, there is the chance of chemical changes and impurities being introduced. Conversely, an air tight container such be OK. Also some people note that fuel injectors can cope with changes in fuel better than carbs.

If you want a comprehensive scientific answer then this published paper Microbial Deterioration of Petroleum Products and their Prevention by Toxic Inhibitors should answer it, but you need to pay to access it. There are a few others too: Degradation of biodiesel under different storage conditions. I can access the second one (I have an academic login) but the first one still costs.

alasta

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Reply # 1214656 14-Jan-2015 11:47

I have always wondered how long it takes petrol to go stale. I try to avoid having more than four weeks' supply in my car, but I don't know if it really makes any economic difference.

networkn

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Reply # 1214675 14-Jan-2015 12:01

I am not talking about buying it physically, I was sort of imagining somehow convincing a service station or petrol company to let me buy 1000L of 98 @ x and then me filling up as needed until my allocated amount was used up.

heylinb4nz

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Reply # 1214697 14-Jan-2015 12:05

networkn: I am not talking about buying it physically, I was sort of imagining somehow convincing a service station or petrol company to let me buy 1000L of 98 @ x and then me filling up as needed until my allocated amount was used up.

Wouldnt really be worth their while 1000 litres is only $30 in their pocket. What if prices go up next time they have to fill their tanks and you a havnt used your allocation ???

nakedmolerat

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Reply # 1214704 14-Jan-2015 12:22

heylinb4nz:
networkn: I am not talking about buying it physically, I was sort of imagining somehow convincing a service station or petrol company to let me buy 1000L of 98 @ x and then me filling up as needed until my allocated amount was used up.

Wouldnt really be worth their while 1000 litres is only $30 in their pocket. What if prices go up next time they have to fill their tanks and you a havnt used your allocation ???

Add their ongoing costs, maintenance etc.

Satch

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Reply # 1214726 14-Jan-2015 12:50

heylinb4nz:
networkn: I am not talking about buying it physically, I was sort of imagining somehow convincing a service station or petrol company to let me buy 1000L of 98 @ x and then me filling up as needed until my allocated amount was used up.

Wouldnt really be worth their while 1000 litres is only $30 in their pocket. What if prices go up next time they have to fill their tanks and you a havnt used your allocation ???

Networkn wouldn't be physically purchasing 1000 litres of petrol on hand from the service station. He would be purchasing the right to buy 1000 litres of petrol from the service station at a fixed, agreed price. The service station would be taking the risk of petrol increasing during the consumption of the allocation, as would Networkn in terms of petrol prices dipping below the contracted price.

But I agree that unless you were purchasing options for 1000's of litres of petrol it just wouldn't be worth it.

BlueShift

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Reply # 1214797 14-Jan-2015 13:59

Satch:

Networkn wouldn't be physically purchasing 1000 litres of petrol on hand from the service station. He would be purchasing the right to buy 1000 litres of petrol from the service station at a fixed, agreed price. The service station would be taking the risk of petrol increasing during the consumption of the allocation, as would Networkn in terms of petrol prices dipping below the contracted price.

But I agree that unless you were purchasing options for 1000's of litres of petrol it just wouldn't be worth it.

Basically like a fixed rate mortgage, but for petrol. You sign up to buy petrol at a set price for the next x months, and presumably would have to commit to buying a minimum amount - otherwise if the price drops, you'd just buy at floating rate til it goes back up...

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