U.S. News & World Report Article: How to Guard Against Rising Gas Prices; LA Times says BBB rates MyGallon.com ‘F’

Posted on July 5, 2008. Filed under: Home & Garden, Travel & Leisure, Uncategorized, Utilities | Tags: , , , , , , , |

U.S.News & World Report
How to Guard Against Rising Gas Prices

Stock investments and prepurchased gallons are hedges for consumers
Wednesday July 2, 3:17 pm ET
By Kimberly Palmer

Rising gas prices are inspiring drivers to find new ways of protecting
themselves against future increases–including buying gas in advance
and investing in stocks that tend to rise along with the price of
gasoline.

One new company, MyGallons.com, lets customers buy gallons ahead of
time based on the current prices in their area–in theory, locking in
a lower price–and then redeem those gallons at a later date,
regardless of any price increases in the interim.

Consumers can also invest in oil companies, coal companies, and other
stocks that are likely to benefit from more expensive oil. “Look for
companies that will benefit indirectly from oil prices and directly
from increased energy efficiency,” says Paul Larson, editor of
Morningstar StockInvestor. That way, he says, consumers can balance
higher expenses at the pump with higher returns on their investments.

At MyGallons.com, the company makes those investments itself. Founder
Steve Verona says that the company protects itself against future gas
price increases through taking positions in the stock market. That
way, customers can enjoy the simplicity of purchasing and redeeming
gallons for an established amount and avoid experiencing market
fluctuations themselves. Verona says the company doesn’t plan to make
money on gas, but rather from the annual membership fee (about $30),
the interest float on the money that is paid before the gas is
redeemed, and advertising on its website.

For consumers interested in hedging their own bets, one option is
investing in oil companies. “When gas prices go up, generally oil
prices have gone up, and that raises [oil companies’] revenue,” Larson
says. He also suggests looking for companies that benefit indirectly
from rising oil prices, such as railroads, which are a more energy
efficient way of moving cargo over long distances than trucks. “That’s
why railroads are doing so well today,” Larson adds.

Oil exploration companies such as Southwestern Energy also offer a way
of protecting oneself against future gas price increases, says Peter
Cohan, president of a management consulting and venture capital firm
that bears his name. In addition, he recommends coal companies,
including Walter Industries, Arch Coal, and Peabody Energy, since coal
can be used as an energy source instead of oil. Alternative-energy
companies, on the other hand, tend to be overvalued right now, Cohan
says, and he advises staying away from them.

Of course, gas prices could come down, which could turn any of these
investment ideas into losing propositions. As with all investments,
says Tim Maurer, director of financial planning for Financial
Consulate, a Baltimore advisory firm, consumers need to be prepared to
stomach volatility. In fact, his firm has recently limited its
exposure to oil in expectation of a short-term market correction.

If prices do indeed fall, then what will happen to MyGallons.com
customers’ prepurchased gallons? Verona says most people will simply
hold on to them until prices go back up again.

But what if prices are currently at their peak and don’t go up again?
Verona says that’s unlikely. “Very few analysts expect prices to come
down…because current demand is increasing, while supply has stayed
steady. We’re talking years, if not decades, before [proposed]
solutions have any impact. In the interim, prices should continue to
rise,” Verona says. He adds that if customers opt to drop out of the
program, they can get a refund for their purchased gallons.

Still, the simplest way to protect oneself from rising gas prices,
says Charlie Ober, vice president at T. Rowe Price and manager of its
New Era Fund, is to drive less, plan vacations closer to home,
carpool, and drive more fuel-efficient vehicles. “I think as a
consumer, you’re going to have to get used to a world of higher
gasoline prices,” he says, “and that is potentially a
lifestyle-changing event.”

To view the article on the U.S. News & World Report site:
http://www.usnews.com/articles/business/your-money/2008/07/02/steeling-yourself-against-rising-gas-prices.html#48807

From the Los Angeles Times
ENERGY

Gasoline seller MyGallons.com gets ‘F’ from Better Business Bureau
A report questions how MyGallons.com processes transactions.

By Elizabeth Douglass
Los Angeles Times Staff Writer
July 4, 2008

With gasoline prices at nosebleed levels, MyGallons.com sounds like a great deal: Pre-purchase gasoline through the website and save cash as the price climbs.

But pumpers should beware.

In a new report, the Better Business Bureau gave Miami-based MyGallons.com an “F” rating, citing what it called “a material omission of fact” in the publicity material distributed as part of the service’s launch Monday.

“It’s just like in school, so ‘F’ is obviously bad,” said Alison Preszler, a spokeswoman for the bureau. “We’re not calling this a scam. . . . We just have serious concerns.”

The company said its gas- redemption program used the Voyager fleet network, a bank-card processing service owned by U.S. Bank. But it has become clear that MyGallons.com doesn’t have a deal with the bank and currently doesn’t have any other card processor in place, Preszler said.

“This is obviously a huge red flag for the Better Business Bureau, because they don’t have the most basic system up,” she said.

MyGallons.com founder Steven Verona said it had an agreement to use the Voyager network through a regional reseller and had processed its card transactions through that system during a three-month trial that recently ended. Verona said he believed his contract was still in effect when he issued the news release about the program’s launch.

Verona supplied the Los Angeles Times with an electronic copy of a June 15 invoice from the reseller, Go Gas Universal. The bill, which includes an account number and MyGallons’ address, lists a total due of $847.70 for 208 gallons of gas purchased in Arizona, Florida, Pennsylvania and Ohio.

“We had an agreement with them. We’ve agreed to go our separate ways, and we are replacing them with one of their competitors,” Verona said in an interview Thursday. “We’ll have a big announcement on Monday or Tuesday with the replacement.”

Minneapolis-based U.S. Bancorp provided a statement Thursday saying: “Neither U.S. Bank National Association ND, nor Voyager Fleet Systems Inc. have a contract to do business with MyGallons.com LLC, and there are no ongoing negotiations to enter into any agreement with MyGallons.”

U.S. Bank didn’t say whether it once had a contract with MyGallons.com, either through the bank or through a regional reseller, and a spokeswoman was unable to immediately verify MyGallons’ claims about Go Gas. Officials at Go Gas Universal couldn’t be reached.

Verona was surprised to hear that his company had been given an “F” grade. “I’m looking forward to straightening this out with the Better Business Bureau,” he said.

The report was posted Wednesday by the Better Business Bureau of Southeast Florida and the Caribbean.

“They’re saying to the public, here are the gas stations where you can go and use this card. Yet there’s no ability for the card to be utilized,” said Michael Galvin, a vice president at the Florida bureau. “They have to prove to us that they’re doing what they’re supposed to be doing, and right now their advertising is erroneous.”

The bureau made no assessment of MyGallons’ business model, which allows consumers to contract to buy gasoline at current prices and store the credit on a debit-like card. The company said the prepaid gas card could be redeemed at a long list of filling stations, including major brands such as Shell and Chevron.

Annual memberships cost $29.95 or $39.95 and there is a $1.95 fee each time customers refill their cards.

MyGallons said it was investing most of the customer money in low-risk accounts, with 20% of it used to purchase fuel-price hedges.

A similar membership service from GasBank USA is set to launch this year. The Boynton Beach, Fla.-based company also would issue debit-like cards that could be used at nearly any gas station — but the company’s website doesn’t say who will process the financial transactions.

In 2000, a Priceline.com affiliate launched a program that allowed users to name their price for gasoline, but the unit, Priceline WebHouse Club, went out of business later that year.

Verona, 39, has been involved in a string of companies including DB Net Ventures Inc. in Upper Darby, Pa.; Jewish Jeans Clothing in Columbus, Ohio; and an online store called Pursue Peace Clothing. Verona confirmed that he filed for personal bankruptcy in Ohio in 2001.

MyGallons.com’s Monday launch got widespread publicity. Verona said the site had signed up 6,000 members. Customers will be sent cards once the company finalizes a deal with a replacement processing firm, he said.

“Things are going great,” Verona said in an interview. “We’ve gotten a tremendous response from the public, and we’re very excited.”

elizabeth.douglass@latimes.com

http://www.latimes.com/technology/la-fi-mygallons4-2008jul04,0,4026537.story?track=rss

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