Pre-paid Fuel – Does Anyone Use It On Boats?

Alex F

Alex F

Well-Known Member
Nov 14, 2006
9,166
Miami / Ft Lauderdale
Boat Info
2005 420DB with AB 11 DLX Tender, Raymarine Electronics (2x12" MFDs) with Vesper AIS
Engines
Cummins 450Cs, 9KW Onan Generator, 40HP Yamaha for tender.
During the raise of fuel cost past summer I’ve heard that one of the ways to save on fuel was to purchase pre-paid plan that locks particular price. Of course those who did it in September didn’t feel very good 1-1.5 months later. But, this got me thinking that if this is something that can be used for boats, now would be a good time to prepay for the summer. I’ve never took advantage of this, but I’d like to know if anyone did and if it worked out fine.

Any input on this is appreciated.

Alex.
 
I was just talking about this with a friend in the petroleum business. I don't have any direct knowledge, but he indicated that it would be possible to buy a season's worth of gas and/or diesel on a forward contract.

The downside to this includes being locked in even if the price goes down, you are tied to a specific place, need to plan in advance for how much fuel you will use several months from now and maybe having to layout a large chunk of cash now rather than a little bit at a time next year.
 
Some of the smart marinas are buying next year's fuel on contract at these lower prices. Most do not. They are not big enough where a supplier would even consider that.

There is/was a company in MN that several years ago, sold fuel at a prepaid amount, where the customer had a "debit" card that deducted his the amount of fuel purchased each time. I never heard anymore about it.

Just think if the Feds would have release those 10's of millions of barrels worth of our Stratigic Oil Reserves at the gross amount of $150/barrel, and they would be replenishing it today at $45/barrel. We might have even gotten a tax break or at least wiped out a good portion of our national debt.
 
I have my diesel fuel delivered to my dock behind the house. I'll give them a call later and see what they say.

I'm not greedy...well not too greedy.....so if I could lock in the current price of ~$2.00/gallon for 1000 gallons of red dino juice now....i'd be a happy camper next season!!!!
 
With both of our boats we kept them on their trailer at an inside-storage place across the road from our lake. The owner offered pre-paid gas pricing every Feb. We took advantage of it for several years and were very happy. Prices on gasoline generally goes up at the start of the summer due to the summer formulations. Generally, but not always.

Even when we had our boat in a slip, we pre-paid gas with this man and took it to our boat in 5 gallon jugs. Our marina didn't care that we filled our tanks ourselves from jugs.

We also get a contract in the late summer for the propane we use to heat the house.
 
Be careful. There is a difference between buying your fuel now and buying a futures contract. The future contract will take into account the seasonal increase in demand. Actually taking delivery of fuel now like Eric suggests just means that you will always be putting old fuel in your tank.
 
If you buy a future commitment for fuel you are going to pay for the price risk assumed by whoever really owns the futures contract.

If you physically take delivery your summer's fuel now and you burn gas, then expect some seious ethanol and moisture related problems. If you burn diesel, then do us all a favor and go ahead and search CSR for the threads on fuel system cleaning, management and additives, now then bookmark the link 'cause you will need it about July.
 
CNN just reported that OPEC is looking to do major production cuts to bring the prices back up.
 
fwebster said:
If you buy a future commitment for fuel you are going to pay for the price risk assumed by whoever really owns the futures contract.

If you physically take delivery your summer's fuel now and you burn gas, then expect some seious ethanol and moisture related problems. If you burn diesel, then do us all a favor and go ahead and search CSR for the threads on fuel system cleaning, management and additives, now then bookmark the link 'cause you will need it about July.
Click to expand...

Frank,
I think at this point a risk of fuel prices going up is much greater vs. going down. This is why I'm looking in to locking current rate for the summer.

I do agree with you and don't plan (not that I have any room to store it) buying fuel now. My boat is now stored with full tanks and E-treatment applied.

Alex.
 
What Frank W and I are saying is that when you negotiate a price for next year you are betting that the price will be higher next summer. But the guy who owns that gas is not sitting in a cave - he also knows that gas prices go up in the summer and he also watches CNN and knows that OPEC wants to keep prices high. You really can only win this bet if something that is unpredictable today happens to affect prices next year.
 
Are you saying that if lets say the marina price today is around $2-$2.50 I cannot have that price locked, instead I have to negotiate what marina is predicting it'll be (may be $3-$3.50)? Am I understanding this correctly?
 
They did this at a marina where we use to keep our boat. The bad news for them was the dock master who implemented this left/got fired/disappeared, kept the $$$, and they had to honor the later fuel purchases.
 
Oil is trading at $40.06 @ 3:00PM today.

The July 10 futures price for crude is $60.68.

I doubt you are going to buy oil for the summer based on current pump prices when somebody some where has to pay a 50% premium to cover the committment for your July oil purchase. If you have to buy the risk anyway you don't gain anything and you will lose if oil happens to remain at $40/bbl.
 
Well, the points raised are valid. But, we never ran into any problems burning the gas we prepaid for, and the price we paid was lower than the summer prices the years we did it. Given the uncertainty of fuel prices these days, I'm not sure we'd do it this year --- if we had a boat.
 
I called my local fuel oil delivery guy. They don't do pre-pay for diesel fuel.....btw...going price for diesel fuel delivered to my house is $2.09/gal.....
 
Sea Gull said:
Yes that is what I am saying.
Click to expand...

Sea Gull,
Thanks for clarification. In that case I see why it's not the biggest "hot" thing on the market. As usual, the title sounds nice until you go in to details. If we're predicting $60/bbl by the next summer and in reality prices get in this range, then what's the point of the program, just to see if prices go higher than your prediction? :huh: This condition doesn't make much sense to get involved. Also, along the lines what Frank was saying, I think even if the price goes to the number the contract is made or even if it's few cents cheaper you're loosing simply b/c you had to prepay X-number of dollars.

Let me try to run a quick exmple, just to make sure I get this right.

Contract prepaid (predicted and negotiated) price for the summer $3.50
100gal @ $3.50 = $350

Lets say the actual price during the summer is $3.80 and I saved $.30 p/g
100gal @ $.30 = $30 saving per 100gal.

So, if I'm predicting two additional fillups (my boat now has full tanks), which is 400gal total (my tank is 200gal) that makes saving worth of $120 (400gal @ $.30). But, in order to even attempt to save anything I have to pay today $1400.

So, based on the example above, I could be saving only less than 10% of total purchase price. This is very low for $1400 investment, considering the fact that price prediction could be way off and I could end up loosing much more than $120.

Alex.
 
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fwebster said:
Oil is trading at $40.06 @ 3:00PM today.

The July 10 futures price for crude is $60.68.

I doubt you are going to buy oil for the summer based on current pump prices when somebody some where has to pay a 50% premium to cover the committment for your July oil purchase. If you have to buy the risk anyway you don't gain anything and you will lose if oil happens to remain at $40/bbl.
Click to expand...


Are these the same people that predicted we would be paying $ 200.00 per barrel by the end of this year? Speculation is just a guess.
 
No.......

Had you bought a barrel of oil for July 10 delivery on the commodities exchange yesterday, that is what it would have cost you. It was an example of how the risk of future price change in a commodity is passed on to the buyer and that you will not be buying July gasoline for today's pump price.
 
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