Hedging Gas Prices
Has anybody thought about hedging gas prices against future rises? I have, a little. Gas prices were a super hot topic when they were about $2 a gallon higher, but I bet people are thinking less abo...
Forum Discussion
The answer is yes, that is exactly what the futures market is for; you can lock in a price today for some commodity you need in the future.
So the guy that makes Cheerios, can buy the oats he needs next year today, and he locks in a price he is comfortable with paying for the oats to be delivered next year. And the farmer selling the oats is comfortable with the price he contracts to receive for the oats that he will deliver next year. The buyers and sellers are by their agreement, setting the "market price" for Oats in the "delivery month" of next year.
But the thing is, you will be buying today, at next years "market price"; you don't get to buy next years oil at "todays" price. I didn't look to see if next years market price was higher or lower than today's price.
So the guy that makes Cheerios, can buy the oats he needs next year today, and he locks in a price he is comfortable with paying for the oats to be delivered next year. And the farmer selling the oats is comfortable with the price he contracts to receive for the oats that he will deliver next year. The buyers and sellers are by their agreement, setting the "market price" for Oats in the "delivery month" of next year.
But the thing is, you will be buying today, at next years "market price"; you don't get to buy next years oil at "todays" price. I didn't look to see if next years market price was higher or lower than today's price.
