Florida Company to Take Fuel Hedging Mainstream
A South Florida company is poised to take fuel hedging to the mainstream by enabling consumers to purchase fuel in a manner similar to that used by Southwest Airlines.
Southwest has set itself apart from other airlines by hedging on fuel prices (i.e., purchasing fuel via long-term contracts that lock in prices), a practice that, according to this Washington Post article, has allowed the discount carrier to stay in the black for 33 consecutive years.
Now, it appears GasBankUSA™ will attempt to replicate the airline’s success for the benefit of those whose primary form of transportation remains grounded at all time.
On its web site, GasBankUSA™ describes itself as “a membership based web site using a subscription model, the first of its kind that allows consumers, businesses, fleets, and over the road truckers to lock in a fixed price for gasoline and diesel.”
Here’s how the process will work, according to the company website:
1. An individual receives his GasBankUSA™ Fuel Card after he signs up and has his membership fee processed;
2. As a member, he purchase gallons at the current GasBankUSA™ price;
3. After the purchase clears, the gallons are deposited into his member account;
4. A member can go to any participating location — including most of the nation’s gas stations — and they can use their GasBankUSA Fuel Card™ to pump up to the number of gallons in their account; and
5. After filling up, the member’s account will be updated to reflect the withdrawal of the number of gallons pumped and a small transaction fee will be added to the cost of the transaction.
While it appears simple enough, the success of this effort will depend largely upon two factors: (1) Whether the company’s back office can indeed support it in a satisfactory manner; and (2) whether the company can establish and maintain a reliable relationship with a reliable nationwide credit card processor.
“One company’s already hit a snag, and paying ahead is always a gamble,” according to a NY Daily News article yesterday. An excerpt from that article appears below:
MyGallons.com, which debuted a service last week aimed at helping members save money by pre-purchasing gas on a debit-like card, still doesn’t have a deal with a company to process its transactions at the pump.
“MyGallons is negotiating with multiple competing national payment networks and expects to have an announcement shortly,” said CEO and founder Steven Verona. He vowed that members will soon be able to use the card at most service stations, or they can cancel and receive a full refund.”
The launch of the GasBankUSA Fuel Card™ is set for the fourth quarter of 2008.
More to come on this one, I’m sure. Here’s hoping the concept works.