jump to navigation

MyGallons.com: Profiteering off the frenzied fear of the weekly fillup July 4, 2008

Posted by The Armchair Economist in Commentary.
Tags: , , , , , , ,

Recently, I’ve been reading countless stories about consumers making ridiculous financial decisions to trade their SUVs for something more fuel efficient, anything ranging from a Smart car to a motorcycle.  The sad part is that for many of these people, they are upside down on their SUV (ie: they owe more on the SUV than the car is worth) so they are paying HIGHLY inflated prices for the gas sipper they are trading into (I’ve heard loans of 39k for a 27k Prius!)  Insane, but this isn’t normally enough to get me to post, but today I came across an article by Kimberly Palmer, of the Alpha Consumer blog on a company called MyGallons.com.

The premise of this company is that you can buy gas at today’s price and use it later, when gas prices increase even more.  Sounds good right?  (if you have any kind of training in finance you probably already see the faults).  The fine print includes: Annual Fee of: $29.95, ($39.95 if you don’t want to give them permission to automatically deduct from your credit card), a $1.95 ‘fill up’ fee if you use a credit card (the only accepted payment method), in addition to other fees (ie: an overdraft fee).  I’ll leave it to you to do some back of the envelope math to see how much ‘savings’ you need to negate the transaction costs.

So what happens if the price of gas goes DOWN?  The FAQ helpfully states: Gas prices move up and down all the time. If prices drop you can wait for them to go back up in the days or weeks ahead. (more…)