Personal Energy Hedging

When I came across this article today I had to smile to myself. The idea of hedging against future price swings is of course common in industry, on both the consumption and production side. It is a tool to reduce uncertainty or, as perhaps more commonly understood, to bet that prices will rise in future (or fall, as in the case of a gold miner or natural gas producer). Now it comes to automobile fuel.

However it isn't needed, and I would argue is not a good option, just as I have avoided those natural gas intermediaries that will lock in a price for your home consumption. To do the same and gain more independence and flexibility, my choice is to invest in producer stocks on public markets.

There is of course a disadvantage for the typical consumer that he or she does not invest or does not invest with that degree of personal involvement, leaving the choice of mutual funds to their investment advisor or banking representative.

If you already play the markets as I do, all you need to do is invest in the commodity producers, refiners and distributors, of which there is a large choice of high-quality names. Then when the share prices of your picks go up (and maybe you also receive dividends and trust distributions) you can sing a happy tune as you fill up the SUV or turn up the thermostat another degree next winter.

If you also make the wise decision to reduce your use of fossil fuels, with this strategy you win twice.