Stock up on gas now or pay $5 later

[NW-Bound]

Looks like I might have an opportunity to sell some oil-related positions and buy a new V8-powered tow vehicle on the cheap in the next couple of years...

But doesn't one need to go long now to get something to sell later, or just wait for the "right time" to go naked short?

I remember in 2008, gas prices and some stock prices lagged the overall market and stayed high when everything else came tumbling down. Now, that's real "market timing" and is scary to me.

 

[brewer12345]

But doesn't one need to go long now to get something to sell later, or just wait for the "right time" to go naked short?

I remember in 2008, gas prices and some stock prices lagged the overall market and stayed high when everything else came tumbling down. Now, that's real "market timing" and is scary to me.

I am quite long energy related stuff now, via positions in CHK and MEOH. The former is now the target of an activist investor (Carl Icahn) and the latter is a chemical company that uses long term, fixed price supplies of natural gas to produce something that can substitute for diesel and gasoline. So if the price of energy goes nuts these things will rocket and I will liquidate, potentially using some of the proceeds for a gas-guzzler. If I short it would most likely be via put options on energy producer ETFs.

 

[NW-Bound]

I did not know of MEOH. Used to have CHK. Wasn't it the one whose CEO got caught in a margin call, which also caused the stock price to tumble a couple of years ago?

I still have nat gas producers like APA, APC, and oil-related equities like OIH, etc... But I admit I do not know off-hand the total as a percentage of portfolio.

 

[brewer12345]

I did not know of MEOH. Used to have CHK. Wasn't it the one whose CEO got caught in a margin call, which also caused the stock price to tumble a couple of years ago?

There is a poster that knows quite a lot about MEOH's industry and has been kind enough to favor me with his knowledge. I've had a position in the company for going on 6 years now and I have a healthy respect for management. I even got the surprising opportunity to buy some of the company's bonds during the crash at a ridiculous yield. I think they are misunderstood and management has repeatedly said that the company trades at a significant discount to replacement value of its plants.

Yep, Mr. McClendon got caught with his pants down and rapidly became "no longer a billionaire." However, the company has probably the best collection of onshore natural gas assets, an expanding oil drilling operation and is dirt cheap even with nat gas prices staying flaccid. The liquidation of Mr. McClendon's stake actually makes the company more vulnerable to an opportunist like Mr. Icahn goading them into some sort of value-unlocking transformation. No telling what will happen as the CEO and the raider face off, but I would not have a hard time making a case for a $45 stock price in a merger.

 

[travelover]

I'm really looking forward to $4 gas, as I bought my hybrid in 2007 and have only had a short stretch of $4 gas to "pay it off". The more expensive gas will save me a ton of money.

 

[bbbamI]

But doesn't one need to go long now to get something to sell later, or just wait for the "right time" to go naked short?

ahem...

Carry on...

 

[NW-Bound]

You expect some photos of these actions, my dear?

Ah, I will carry on...

If I short it would most likely be via put options on energy producer ETFs.

I do these kinds of short-term trading inside IRAs because I do not want to think of taxes when making a decision. And inside IRAs, many brokerages have restrictions on option trading. However, there are all kinds of ETFs now, and there should be a bear ETF on energy. I will look into it, but there's still plenty of time.

 

[accountingsucks]

Haven't read the responses, but in my case what I do as a hedge against these expenses is to invest in O&G trusts. Living in Canada there is no shortage of these trusts to invest in. Most pay dividends in the 6-10% range plus have appreciated nicely. My top pick, purchased 4 years ago has returned 96% annualized in the time I've had it . Right now I believe nat gas stocks are the way to go given their depressed prices at the moment.

 

[Gumby]

I am hedged with long positions in both CHK and BRY (Berry Petroleum Company). An unusual bet on rising gasoline prices might be GRA (W.R. Grace), which makes cracking catalysts for refiners.

 

[kumquat]

Of course gas is more expensive in Canada.

Yep, get ready for it.

I really wonder why our gas is so expensive. Is it:

• all that crude oil we import from the US
• the fact that crude is priced in US$ and C$ is so low
• UFO's
• 
• Oh, did I forget politicians?

 

[NW-Bound]

Is it possible that the health care funding has something to do with your gas tax?

 

[GrayHare]

$5 for a gallon of gasoline in 2012 - Dec. 27, 2010

The former president of Shell Oil, John Hofmeister, says Americans could be paying $5 for a gallon of gasoline by 2012.

Not quite $5 yet, but getting closer...

 

[ratto]

One thing is for sure: my future retirement home will not be using heating oil. Most likely it will be a hybrid of solar, LPG, kerosene and firewood.

 

[rescueme]

One thing is for sure: my future retirement home will not be using heating oil. Most likely it will be a hybrid of solar, LPG, kerosene and firewood.

If you're 6 feet under (your future final "retirement home"), you don't need to worry about it ...

 

[ratto]

If you're 6 feet under (your future final "retirement home"), you don't need to worry about it ...

rescueme, you're so bad! I almost ruined my keyboard while sipping my tea.

 

[Midpack]

Isn't that interesting. Though I didn't post on the thread, I remember his projection, and I remember thinking the guy was a loon. Shows you what I know.

$5/gal gas looks inevitable this year now. We've seen $4.459/gal here already (not to mention downtown Chicago which is already over $5), and the summer formulations will only push prices up this summer.

However, the crude oil prices don't correlate with the gas prices we're seeing, at least based on what we say in 2008. So maybe there's some fluff that will shake out, but I'm not holding my breath...

 

[ziggy29]

However, the crude oil prices don't correlate with the gas prices we're seeing, at least based on what we say in 2008. So maybe there's some fluff that will shake out, but I'm not holding my breath...

In reality these prices don't really even correlate with current supply and demand, either. It's based on what *might* happen and the futures markets (both businesses hedging future costs and pure speculators) jack up the price of oil. It can rise $10 a barrel overnight if someone in the Middle East sneezes the wrong way, even though ***nothing*** has changed about the current supply and demand balance.

Frankly, the way the oil market is today pretty much guarantees no robust recovery. As soon as really promising economic numbers come out, we'll see $150-200 oil and that will kill it.

 

[Midpack]

In reality these prices don't really even correlate with current supply and demand, either. It's based on what *might* happen and the futures markets (both businesses hedging future costs and pure speculators) jack up the price of oil. It can rise $10 a barrel overnight if someone in the Middle East sneezes the wrong way, even though ***nothing*** has changed about the current supply and demand balance.

Frankly, the way the oil market is today pretty much guarantees no robust recovery. As soon as really promising economic numbers come out, we'll see $150-200 oil and that will kill it.

I can't disagree. I hope we'll be pleasantly surprised, but not betting on it...it's more out of our hands as a country than ever, and will only get more so IMO.

But I've been surprised many times before. I remember when I was expecting Japan was going to be "the superpower" - that sure didn't come to pass.

 

[Hamlet]

We already have better options than $20/hr gas.

The Volt is too expensive at current gas prices, but move gas to $8/gallon and they will sell as fast as they can be built. Most people live close enough to work that they would need very little gasoline if they owned a Volt.

Businesses are already starting to switch everything they can over to natural gas. I expect to see some gas stations on major trucking routes start providing natural gas refueling. I wouldn't be surprised to see much of our trucking switch over to natural gas in the next ten years.

I think we may have seen peak gasoline demand in the US.

We are now a net exporter of refined fuels. There are a growing number of businesses in the US that benefit from higher gas prices, and our other business have shrinking dependence on gas. In twenty years, I wouldn't be stunned to have high gas prices be a net positive to the US economy.

Why not? Gas was $1.03/gallon 12 years ago.

Vehicle Technologies Program: Fact #364: March 21, 2005 Historical Gas Prices, 1919–2004

So we have had a 3x-4x increase in just 12 years. I fully expect a 5x-6x increase over the next 30 years (about 5-6% growth). Unless some affordable alternate energy form takes off before then, but we didn't get that in the past 30 years either.

-ERD50

 

[Midpack]

We already have better options than $20/hr gas.

I think we may have seen peak gasoline demand in the US.

We are now a net exporter of refined fuels. There are a growing number of businesses in the US that benefit from higher gas prices, and our other business have shrinking dependence on gas. In twenty years, I wouldn't be stunned to have high gas prices be a net positive to the US economy.

Sounds like you read this. I did, and it's certainly a thought provoking book...

 

[Hamlet]

I haven't actually.

I just saw the export numbers for last year, and was surprised that our largest export was refined fuels, and that we were a net exporter of them for the first time in many decades.

Our GDP has returned to pre-crisis levels, but our gasoline consumption (and employment ) are dramatically lower.

It would be ironic indeed if twenty years from now we are hoping for higher gas prices to juice our economy.

Sounds like you read this. I did, and it's certainly a thought provoking book...

 

[harley]

$5/gal gas looks inevitable this year now. We've seen $4.459/gal here already (not to mention downtown Chicago which is already over $5), and the summer formulations will only push prices up this summer.

That's amazing. I filled up yesterday and paid $3.79/gal. I know there are differences based on location, but I didn't realize i was that big. Back in the DC metro area it tends to run 20-30 cents higher, but I think that's mostly a reflection of higher real estate costs. The difference between diesel and gas (~10%) vs. the difference in mpg for our diesel Bug (45-50 mpg) is really paying off these days.

 

[ziggy29]

The Volt is too expensive at current gas prices, but move gas to $8/gallon and they will sell as fast as they can be built. Most people live close enough to work that they would need very little gasoline if they owned a Volt.

I work at home full time, rarely drive out of town and put maybe 4,000 miles a year on my car lately. And since I can get from any place in town from any other place without going on streets with posted speed limits over 35, I am more and more tempted to get a "neighborhood electric vehicle" and use that for all my puttering around town.

At its current price I'd sooner ride a bike even in the Texas summer than buy a Volt.

 

[Hamlet]

A Volt is always going to be a bad choice if you don't drive much.

Of course, if you don't drive much, gas prices aren't a big concern.

I work at home full time, rarely drive out of town and put maybe 4,000 miles a year on my car lately. And since I can get from any place in town from any other place without going on streets with posted speed limits over 35, I am more and more tempted to get a "neighborhood electric vehicle" and use that for all my puttering around town.

At its current price I'd sooner ride a bike even in the Texas summer than buy a Volt.

 

[mh]

I work at home full time, rarely drive out of town and put maybe 4,000 miles a year on my car lately. And since I can get from any place in town from any other place without going on streets with posted speed limits over 35, I am more and more tempted to get a "neighborhood electric vehicle" and use that for all my puttering around town.

At its current price I'd sooner ride a bike even in the Texas summer than buy a Volt.

I've been using my bicycle for most of my around town transportation since I fired last month. Once my sedentary cubicle body got used to it, I much prefer it over using the car. I took a risk and splurged on a nice city bike that rides efficiently. That and the fact that my suburb is well developed makes going to the market a fun activity and not a chore.