A man takes a picture of a sign at a gas station in Los Angeles. There are two streets in downtown Los Angeles. The Los Angeles Times usesMel Melcon.
We all know that gasoline and diesel prices have gone up in the past. The oil companies are making money.
The public would be upset by this. If my cable bill went up, I would be angry as well.
Oil isn't priced the same way as cable or phones. The cable company makes a decision on how much to charge. That isn't how oil and gas prices are.
The price of oil is not decided by a board of directors. The stock market is similar to the market for those prices. No one knows where oil prices will go in the future. They plan based on those forecasts.
They will lose a lot of money when they're wrong. Big Oil lost $76 billion when the price of oil fell in 2020. They lost money when the market was flooded with oil.
Do you think about it? Do you think oil prices will ever be negative? Do you think they would ever make a profit? How often do you hear about your cable company's financial troubles? They don't because they control their prices.
I was told this week that I wish my paycheck would go up. I told him the same thing I tell people who say this. It can, that's right. There is an oil company.
Some numbers are being looked at. The average retail price of gasoline has gone up over the past six months. A family uses about 1,100 gallons of gasoline a year. The average family's fuel costs have gone up by $2,750 in just six months.
Most people get that amount of money. At the same time, it makes the oil companies richer.
Six months ago, we hedged against this risk by buying some shares of the company. The company's shares were trading at $116. They are more than 50% higher today. If you owned 44 shares of the company, the gain over the past six months would equal the increase in fuel costs.
There are two big things that can go wrong. You would have paid $5, 100 for those 44 shares six months ago. Some people don't have that kind of money.
Oil company shares go down when the price of oil goes down. At one point in 2020, the shares of the company fell by over 50%. The risk in hedging is that. You can tie your paycheck to the price of oil. It is a double-edged sword that can cut in different directions.
This isn't the only way to hedge against high fuel prices You can always switch to an electric vehicle if you want to.
If you ever invested in an oil company, you would learn something. It is a difficult job. There are times when the times are good for them.
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