Winnipesaukee Forum - View Single Post - Stop HB443 - It will change how you can pre-buy fuel

Mink Islander · 07-15-2009, 06:51 AM

This is fundamentally a consumer protection issue. As Hazmatmedic said already, any reputable firm that offers pre-buy contracts to consumers goes into the oil futures market to buy (read lock in) oil to be delivered at a future date at a contract price in sufficient volume to cover most, if not all the contracted volume. That's what they should do since they can lock in their fuel costs, add their margin and properly price the contract for the consumer. If the fuel distributor sells pre-buy contracts and doesn't cover its future delivery obligation by purchasing futures contracts, then it's no longer just a fuel oil distributor, it's now also in the oil speculation business and using the consumer's money to play the game. If oil prices fall, he stands to make a windfall, but if oil price rise signficantly, the dealer would no longer be able to acquire the fuel he contracted to deliver to consumers without taking huge losses. That's why every once in a while you hear about oil distributors going out of business in the middle of the season, leaving pre-pay customers with neither their money nor the oil they thought they bought.

So please, AW, tell us what the problem is here? How is this going to drive up consumer's costs?

Honestly, you either don't understand the amendment or have been fed some very bad info.

07-15-2009, 06:51 AM	#4
Mink Islander Senior Member Join Date: Apr 2004 Posts: 753 Thanks: 59 Thanked 271 Times in 129 Posts	What's the problem? This is fundamentally a consumer protection issue. As Hazmatmedic said already, any reputable firm that offers pre-buy contracts to consumers goes into the oil futures market to buy (read lock in) oil to be delivered at a future date at a contract price in sufficient volume to cover most, if not all the contracted volume. That's what they should do since they can lock in their fuel costs, add their margin and properly price the contract for the consumer. If the fuel distributor sells pre-buy contracts and doesn't cover its future delivery obligation by purchasing futures contracts, then it's no longer just a fuel oil distributor, it's now also in the oil speculation business and using the consumer's money to play the game. If oil prices fall, he stands to make a windfall, but if oil price rise signficantly, the dealer would no longer be able to acquire the fuel he contracted to deliver to consumers without taking huge losses. That's why every once in a while you hear about oil distributors going out of business in the middle of the season, leaving pre-pay customers with neither their money nor the oil they thought they bought. So please, AW, tell us what the problem is here? How is this going to drive up consumer's costs? Honestly, you either don't understand the amendment or have been fed some very bad info.