Oil price dropped a few bucks the last few weeks. I beleive it is a good time to lock in the gasoline price now. If you have to spend 2 grands a year on gas, you can buy the same amount of oil price-pegged ETFs(Exchange Traded Funds). That way your gas bill won't be subejct to any fluctuations in crude oil or to any stupid conflicts in the middle east.
A few caveats: (1) The hedging strategy only lasts for a certain period of time. In the previous example, you still will have to take whatever the gas price is next year. If you want to lock in the price for more years, interests forgone should be taken into consideration as well.
(2) Hedging is a double-edged sword. You won't have losses, but you also give up any potential gains. If the oil price keeps dropping, your ETF holding will shrink, too. Such an outcome will be worse than doing nothing at all.
It is no magic that I came up with this strategy. I got burned pretty bad by owning this ETF (symbol: USO) lately. I need to think a way to comfort myself and here it is. What a finance genius!
(Picture: Yahoo! Finance)
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