MyGallons.com is a futures service for fuel that is open to everyday consumers that is part really interesting and part scary. Interesting because it gives financial mechanisms to consumes and offers the promise of real savings at the pump, but the scary part is that average consumers are ill-equipped to manage the process that the service dictates and it could end up costing them more over the long run.
I define this as a “futures” service but only because you are locking in a price by pre-purchasing gasoline and storing the value of that fuel in a debit card. This is not a futures market where you are buying a contract for future delivering and then trading it, you are actually taking delivery of fuel in increments.
For small businesses or fleet operators this could make real financial sense but for the average consumer I can’t see how this would add up to big savings in light of the fees that you are obligated to cover as part of the network. These fees include:
- $29.95-39.95 sign up fee
- $1.95 fee every time you reload your account
- $15 overdraft fee when your account goes negative
There are additional adjustments on the price you are paying based on taxes and the grade of fuel you are buying at the pump. You pre-purchase regular unleaded gasoline and the price is adjusted if you fill up with premium unleaded, or diesel (which is not gasoline at all).
I’ve looked at this pretty carefully and I’m not quite sure how the pre-purchase price is calculated. I think they are taking an average across a range of prices in your home zip code and then using the actual pump price at the point of sale, but then there is a single sentence in the FAQ that left me wondering.
For example, if you live in CA and traveled to NJ where gas is about 50 cents a gallon less, you will earn a credit of 50 cents per gallon. It works in reverse if you use the card where gas is priced higher than your home area.
So after reading the FAQ I am left wonder how this service really works. They are almost too clever and that makes the service difficult to understand, and the website certainly doesn’t help in this regard, if anything their website left so many questions unanswered that I would be inclined to not sign up for that reason alone. For fleet operators this could make sense, but there is a provision in the terms that precludes fleet operators from using this, specifically requiring that only a vehicle “you drive” is eligible, plus they will give you a limit of 3 additional cards.
For this to work for consumers the bar is steep. First and foremost, you have to consume enough fuel to make the incremental cost savings exceed the fees you are paying, and because the savings you can achieve are a function of the time between when you load the card and then use it, well you have to pre-purchase a hell of a lot of fuel to get to the point where the price differential naturally widens.
Lastly, you really have to actively manage this by loading the card when gasoline prices dip and always knowing where you are, plus you are betting that fuel prices will continue to climb and while that has been a safe bet for the last year it is not entirely a certainty going into the future. It seems to me that a more certain method to hedging rising fuel costs would be to offset rising fuel costs by playing the volatility of oil stocks, which trade in a pretty constant range and with predictable swings.