Constructing a petrol price hedge - How?
- Thread starter kingboonz
- Start date
Exciting topic!
I think a proper hedge will be hard, but you should be able to make money with rising oil prices and therefore hedge the increase of your increased petrol cost, but hard to make 1$ for every $ you pay more at the gas station
Beware of the fees and transaction cost to build such a hedge... the minimum cost to buy and sell will be anywhere between 20-40$ (10-20 per trade
I think a proper hedge will be hard, but you should be able to make money with rising oil prices and therefore hedge the increase of your increased petrol cost, but hard to make 1$ for every $ you pay more at the gas station
Beware of the fees and transaction cost to build such a hedge... the minimum cost to buy and sell will be anywhere between 20-40$ (10-20 per trade
theMKR
Banned
- Joined
- Nov 3, 2016
- Messages
- 70,925
- Reaction score
- 13,557
buy the ticker of the pump petrol u use.
before u pump, buy the ticker.
then pump using credit card 30 day credit term
sell part of the ticker to pay the petrol after 30days.
repeat.
overtime u will accumulate a lot of o&g stocks, once u reach 5%, storm into their boardroom and demand a seat as director.
then implement petrol discount card for shareholders.
before u pump, buy the ticker.
then pump using credit card 30 day credit term
sell part of the ticker to pay the petrol after 30days.
repeat.
overtime u will accumulate a lot of o&g stocks, once u reach 5%, storm into their boardroom and demand a seat as director.
then implement petrol discount card for shareholders.
BBCWatcher
Arch-Supremacy Member
- Joined
- Jun 15, 2010
- Messages
- 24,504
- Reaction score
- 5,549
You can effectively hedge electricity prices in Singapore, which are strongly correlated with natural gas prices, for up to 3 years by simply contracting with one of the electricity retailers.
Petrol (gasoline) is much tougher. The price of petrol landed in Singapore is related to oil prices, but it's also related to petrol duty, set at 56 cents (or 64 cents for higher grades) per liter last I checked. The government can change these duty rates at any time, and the government is highly likely to raise petrol duties when it thinks oil prices are persistently low. I don't know of any way to hedge against a local tax increase, but if you really want you can trade in the gasoline futures market in some other country. It looks like there are two major gasoline futures markets: the CME Group's RBOB (Reformulated Regular Gasoline Blendstock) futures (U.S.) and the Tokyo Commodity Exchange's gasoline futures (Japan). For example, in the U.S. gasoline futures market one contract is for future delivery of 42,000 U.S. gallons of gasoline (RBOB), quoted in U.S. dollars and cents per gallon with a minimum price increment of US$0.0001 per gallon (US$4.20 per contract). Contracts are available for all future months up to about 3 years from now. If you buy and hold the futures contract to expiration then, yes, you're getting 42,000 gallons of gasoline blendstock per contract delivered in New York. And you have a few delivery vehicle choices, such as barge or pipeline delivery. No kidding, seriously.
There's another, simpler way to hedge against higher petrol prices to some degree: when you see a retail price you like, fill your car's tank! Also, drive less, and buy more fuel efficient vehicles. If you buy a pure EV, then see above for retail electricity contracting.
Petrol (gasoline) is much tougher. The price of petrol landed in Singapore is related to oil prices, but it's also related to petrol duty, set at 56 cents (or 64 cents for higher grades) per liter last I checked. The government can change these duty rates at any time, and the government is highly likely to raise petrol duties when it thinks oil prices are persistently low. I don't know of any way to hedge against a local tax increase, but if you really want you can trade in the gasoline futures market in some other country. It looks like there are two major gasoline futures markets: the CME Group's RBOB (Reformulated Regular Gasoline Blendstock) futures (U.S.) and the Tokyo Commodity Exchange's gasoline futures (Japan). For example, in the U.S. gasoline futures market one contract is for future delivery of 42,000 U.S. gallons of gasoline (RBOB), quoted in U.S. dollars and cents per gallon with a minimum price increment of US$0.0001 per gallon (US$4.20 per contract). Contracts are available for all future months up to about 3 years from now. If you buy and hold the futures contract to expiration then, yes, you're getting 42,000 gallons of gasoline blendstock per contract delivered in New York. And you have a few delivery vehicle choices, such as barge or pipeline delivery. No kidding, seriously.
There's another, simpler way to hedge against higher petrol prices to some degree: when you see a retail price you like, fill your car's tank! Also, drive less, and buy more fuel efficient vehicles. If you buy a pure EV, then see above for retail electricity contracting.
Last edited:
Important Forum Advisory Note
This forum is moderated by volunteer moderators who will react only to members' feedback on posts. Moderators are not employees or representatives of HWZ Forums. Forum members and moderators are responsible for their own posts.
Please refer to our Community Guidelines and Standards and Terms and Conditions for more information.
