Gambling on Oil Futures

Volume 9, Issue 70; 17 Jul 2006; last modified 08 Oct 2010

We bought a winter's supply of fuel oil today. Gambling that the price of oil will go up seems a pretty safe bet.

Although we've been doing it for several years, this the first year that it struck me that buying a full winter's supply of fuel oil in July or August is a gamble on oil futures.

I don't think of myself as a commodities trader and it amuses me for no reason I can adequately explain.

In any event, we've locked in our price for this winter: $2.69/gallon (there's really nothing amusing about that). I suppose it's within the realm of theoretical possibility that fuel oil prices could go down between now and winter. Seems unlikely though.

Comments

I find it incredible how one ocean can make such a huge difference. (Maybe it's not so incredible, it's mostly taxes.) 2.69$/gallon? The current average Shell price in the Netherlands is 7.00$/gallon.

—Posted by Sjoerd Visscher on 17 Jul 2006 @ 07:28 UTC #

The sure thing? The funky thing about economics is when everyone thinks it is a sure thing. That is the point when the prices moves the other direction, the real "Sure Thing."

—Posted by Tom on 17 Jul 2006 @ 07:37 UTC #

I believe commenter Sjoerd Visscher will find that Netherlands taxes oil at much higher rates than the US. It's not geography, but governance and policy that makes the difference.

—Posted by MJ on 31 Jul 2006 @ 02:03 UTC #

And, as it turns out, the prices did go down. So this year, I lost. I've won before, and I had peace of mind in any event, so I don't mind. Much.

—Posted by Norman Walsh on 25 Apr 2007 @ 12:09 UTC #