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ST. CLOUD, Minn.--While motorists across the nation are feeling pain at the pump, customers of Minnesota’s First Fuel Banks are enjoying the luxury of cheap gas. First Fuel Banks bills itself as the only retailer in the country where customers can buy gasoline for the future and hedge against rising prices, reported the Associated Press.
Customers can buy gallons of gas from the retailer and tap into that reserve whenever gas rises above the price that they originally purchased the fuel. For example, one customer, a retired milk truck driver, bought 500 gallons of gas at First Fuel Banks a year ago at the then-current price of $2.03 a gallon. He taps that reserve whenever gas rises above that mark. If the retail price drops below $2.03, he can leave his reserve alone and buy elsewhere, reported AP.
The company advertises no service charge and no storage charge, just a $1 lifetime membership fee, according to the report.
Both people and businesses buy gas from the company, which has six stations in and around this central Minnesota city. The city of St. Cloud fills its fleet of cars at the company's stations, AP reported.
The program is open to anyone who drives in off the street. Customers buy whatever amount they want at the current price -- the most ever purchased in advance was $400,000 worth -- then swipe a card and key in a PIN number when they draw from their reserve, according to the report.
Chief Executive Jim Feneis, who runs the company with his brother Dan, said in the report that 300 of its members are still filling up with gas that cost them less than a buck a gallon as recently as 2002. Many more are locked in under $2.
"We're offering a pretty attractive concept to the savvy buyer,” Jim Feneis told AP.
Each station has a 50,000-gallon tank for each grade of gasoline -- regular, mid-grade and premium -- compared with 6,000 to 8,000 gallons for each product at a typical convenience store, he said.
That is enough capacity to handle short- and medium-term demand, he told AP. For people holding onto reserves for a year or longer, the company hedges its obligations by buying gasoline futures contracts on the New York Mercantile Exchange.
First Fuel Banks started with a single station in 1982 and now has about 8,000 members, Feneis said in the report. It makes its money just by selling gasoline, diesel and some specialty fuels since its stations are not convenience stores.
He told AP it has less than 5 percent of the St. Cloud area market. But he added that it is just one part of a larger business, East Side Oil Co., hat has other divisions such as oil recycling.
A few other stations in the country have tried a similar approach, but none has succeeded, he told AP
Lance Klatt, executive director of the Minnesota Service Station and Convenience Store Association, told AP he can understand why--price volatility and risk.
"There's no margins anyway" in the gasoline business, he said in the AP report.