Propane at 0.69/gallon

[BJE80]

Holy cow. Just called the propane sellers and they said $0.69/gallon delivered. Holy cow. Never remember prices that low anytime recent. Wish I could buy 10,000 gallons right now.

 

[MoLandOwner]

You Can.

Buy a futures contract if you think it is going up.

 

[dipper]

I use very little natural gas on a line that comes to my house. It doesn't break my bank, but my bill is $20s in fees and like $2 of actual fuel.
Times like this tempt me so much into switching to propane and buying a tank!
I just can't stand getting ripped off, no matter what the cost!!!! In case u guys didn't catch that already.....

 

[BJE80]

I use very little natural gas on a line that comes to my house. It doesn't break my bank, but my bill is $20s in fees and like $2 of actual fuel.
Times like this tempt me so much into switching to propane and buying a tank!
I just can't stand getting ripped off, no matter what the cost!!!! In case u guys didn't catch that already.....

Propane has bigger peaks and valleys for sure. If you can buy once a year and then buy in august you might be on to something. NG is more stable not being related to the production and cost of petro.


FWIW, L&L propane out of Waupaca seems to have the best prices around. I get my propane out of their Merrill office.

 

[BJE80]

You Can.

Buy a futures contract if you think it is going up.

What I want is a like 10 years of propane for $0.69 gallon and lock that in.

 

[kabic]

You Can.

Buy a futures contract if you think it is going up.

If I remember right a few winters ago even the people who had pre bought at the lower price still had problems actually getting it delivered and had to buy from someone else so their tank didn't go empty so they could keep the heat on.

 

[West Branch]

If I remember right a few winters ago even the people who had pre bought at the lower price still had problems actually getting it delivered and had to buy from someone else so their tank didn't go empty so they could keep the heat on.

A futures contract is different than pre buying, which is a forward contract. A December 15 contract for conway propane is currently priced at $0.49 for 42,000 gallons. You can also buy on margin for some leverage, but it takes some testicular fortitude when the prices start moving the wrong way. Simple explanation:

Buy a Dec contract on CME for $20,580.
Dec contract price goes up to .85 by Nov 15.
You sell and make a profit of 15,000.
Use that cash to go buy your propane

Piece of cake ;)

 

[MoLandOwner]

If I remember right a few winters ago even the people who had pre bought at the lower price still had problems actually getting it delivered and had to buy from someone else so their tank didn't go empty so they could keep the heat on.

There were logistics problems then and could be in the future. Futures contract have nothing to do with that. They can offer protection from rising prices.

 

[dipper]

A futures contract is different than pre buying, which is a forward contract. A December 15 contract for conway propane is currently priced at $0.49 for 42,000 gallons. You can also buy on margin for some leverage, but it takes some testicular fortitude when the prices start moving the wrong way. Simple explanation:

Buy a Dec contract on CME for $20,580.
Dec contract price goes up to .85 by Nov 15.
You sell and make a profit of 15,000.
Use that cash to go buy your propane

Piece of cake ;)

Interesting, but who's physically holding onto the gas? In theory this sounds really good, but how do you physically move the gas when the price rockets?
The guy that's storing the fuel will tell you to get in line when you want to sell, or have your fuel delivered. That's what kabic is explaining.
As your waiting, the guy possessing the fuel is going to let it out the door at top dollar. Finally when the dust settles, and his pockets are fat, your informed your fuel is on its way from the gulf.
I don't know anything about these contracts, but after a life of getting screwed, I don't take anything for granted if it isn't in my hand!

 

[dipper]

I think the only way your guaranteed a certain price is if you get a few thousand gallon tanks, fortify the pi$$ out of it, and fill up when the price drops next.
Otherwise your stuck like me, and bent over the barrel.

 

[BJE80]

Interesting, but who's physically holding onto the gas? In theory this sounds really good, but how do you physically move the gas when the price rockets?
The guy that's storing the fuel will tell you to get in line when you want to sell, or have your fuel delivered. That's what kabic is explaining.
As your waiting, the guy possessing the fuel is going to let it out the door at top dollar. Finally when the dust settles, and his pockets are fat, your informed your fuel is on its way from the gulf.
I don't know anything about these contracts, but after a life of getting screwed, I don't take anything for granted if it isn't in my hand!

I'm no expert but I believe it is basically like a derivative. You don't own the actual hard commodity. You are basically betting on the price of the commodity.

 

[SD51555]

Did a lot of you guys have problems even getting propane when that happened? I've heard the big difference in suppliers is not the price, but availability when something like that happens and ability to contract quantities out a certain period of time.

 

[West Branch]

Interesting, but who's physically holding onto the gas? In theory this sounds really good, but how do you physically move the gas when the price rockets?
The guy that's storing the fuel will tell you to get in line when you want to sell, or have your fuel delivered. That's what kabic is explaining.
As your waiting, the guy possessing the fuel is going to let it out the door at top dollar. Finally when the dust settles, and his pockets are fat, your informed your fuel is on its way from the gulf.
I don't know anything about these contracts, but after a life of getting screwed, I don't take anything for granted if it isn't in my hand!

Yup, the prebuy is a "forward contract", the futures contracts are similar to publicly traded securities traded on exchanges that are standardized. Both are derivatives since they derive there value from an underlying product.
Differences:
http://www.theoptionsguide.com/difference-between-futures-and-forwards.aspx

Trading futures contracts:
http://www.theoptionsguide.com/futures-trading.aspx

Here is a good book on derivatives if anyone is interested:
http://www.amazon.com/About-Derivatives-Second-Edition-Series/dp/0071743510

The biggest difference is the counter party risk. Since the futures are on the exchange there is very little risk. If futures contracts are not getting filled we have much bigger things to worry about and you better know how to grow tomatoes and chop firewood.

 

[West Branch]

I'm no expert but I believe it is basically like a derivative. You don't own the actual hard commodity. You are basically betting on the price of the commodity.

When you know you have to buy or sell the product it is no longer betting, it is hedging ;).

 

[BJE80]

When you know you have to buy or sell the product it is no longer betting, it is hedging ;).

Well I was trying to get Dipper to understand so I was using Layman's terms. That is my story and I'm sticking to it.

 

[dipper]

I'm no expert but I believe it is basically like a derivative. You don't own the actual hard commodity. You are basically betting on the price of the commodity.

Bj-For the most part I give them the finger and burn wood! It's one of the perks of owning land, tractors, etc. The only way I get caught with my pants down is if I'm lazy and don't make my firewood, and that ain't gonna happen! I even got my outdoor Hotub rigged up, paradise at -10.
I gained plenty of favors the year those prices rocketed by bartering my surplus of firewood. Desperation is an interesting thing to observe and capitalize off of.

 

[dipper]

You financial guys with your fancy words. Haha
My dictionary starts and stops at barter.

 

[BJE80]

This whole discussion reminds me of this. :cool:

 

[wiscwhip]

You gotta strike while the iron is hot boys!

 

[dipper]

Burn baby burn, is there something wrong if my 401k is buried in a coffee can?