Conglomerate Blog: Business, Law, Economics & Society

In the midst of all the quite frankly depressing stories about high gas prices and now increasing consumer prices, I ran across a story about MyGallons.com—a program that at first glance seemed like a good way to protect against rising gas prices, but has developed into quite a saga.

Mygallons.com allows you to pre-purchase gallons of gas at current gas prices to be used at a later date, avoiding the cost of any future increases in gas prices. Under the system, you pay an annual fee and receive a kind of debit card which allows you to pre-purchase as much gas as you want at a cost based on current gas prices in your area. You then use the card at participating gas stations. The number of gallons pumped is deducted from your account balance. However, regardless of the listed gas price, you buy your gas at your pre-purchase amount—Mygallons.com pays the difference. According to the website, you can pre-purchase as much or as little gas as you’d like, there is no time limit on when you must use your gallons so long as you keep up the annual fee, and you can redeem any unused amounts. At first glance, it seems like a good way to protect against rising gas prices. SO . . . is there a catch?

To be sure, the system does not work unless gas prices increase sufficiently to cover the fees associated with use of the card. On the one hand, Mygallons.com notes that people who signed up for the program in April of 2008, saved lots of money as gas prices soared. To the extent we no longer see big prices increase, however, such savings may not occur. Of course, the ability to redeem unused gallons may minimize this concern. On the other hand, there are fees associated with the cards usage that may undercut any savings. First is the most obvious $29.95 annual fee. Second, however, if you purchase more gas than you have in your account, you must pay the actual cost of the gas plus a $15 overdraft fee. To protect against this possibility, you can enroll in an automatic repurchase plan for $39.95, which plan automatically repurchases more fuel when your balance drops below 15 gallons. In most cases there also appears to be a $1.95 re-loading fee when you buy more gallons. Then too, the pre-purchase price is for regular unleaded so if you buy premium you must pay the difference in cost. All of these fees reveal that consumers must be careful to watch their account balance to ensure that they reap more in savings than fees.

And then there is this concern—how exactly does this company make money? Indeed, the company seems to have to generate enough revenue to pay the difference between consumers’ pre-purchased price and the current price of gas as well as earn some profit or else it could go under, leaving cardholders with useless plastic. In this regard, the company will be able to make use of the upfront annual fees as well as the pre-purchased amounts, over 80% of which the company says will be invested in “money markets and U.S. government backed notes.” Hmmmm . . .

And finally, the gas program does not work unless the cards are honored by gas stations. Unfortunately, shorty after the company's public launch, its provider of fuel card services indicated that it would not support the program, and hence apparently would not honor issued fuel cards. Because this appeared to be inconsistent with MyGallon.com’s claim that its cards would be honored across the country, the Better Business Bureau of South Florida (where the company is headquartered) gave the company an “F” rating. Now, after talks with MyGallons.com representatives, the SFBBB has revised its rating to “NR.” As of now, it appears that MyGallons.com does not have a vendor able to process transactions with gas stations, and hence has suspended acceptance of new membership fees until a vendor can be secured. MyGallons.com apparently also has agreed to refund consumers’ cards and give them a free one year membership once a provider is located.

These developments suggest that this may be a program good in theory but difficult to implement. And yet, it should be noted that apparently when the company first issued cards in April 2008, there was a vendor in place and cardholders did in fact reap some benefits. So perhaps it is something that can work again, and that at least would be some positive economic news.

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In the midst of all the quite frankly depressing stories about high gas prices and now increasing consumer prices, I ran across a story about MyGallons.com—a program that at first glance seemed like a good way to protect against rising gas prices, but has developed into quite a saga.

Mygallons.com allows you to pre-purchase gallons of gas at current gas prices to be used at a later date, avoiding the cost of any future increases in gas prices. Under the system, you pay an annual fee and receive a kind of debit card which allows you to pre-purchase as much gas as you want at a cost based on current gas prices in your area. You then use the card at participating gas stations. The number of gallons pumped is deducted from your account balance. However, regardless of the listed gas price, you buy your gas at your pre-purchase amount—Mygallons.com pays the difference. According to the website, you can pre-purchase as much or as little gas as you’d like, there is no time limit on when you must use your gallons so long as you keep up the annual fee, and you can redeem any unused amounts. At first glance, it seems like a good way to protect against rising gas prices. SO . . . is there a catch?

To be sure, the system does not work unless gas prices increase sufficiently to cover the fees associated with use of the card. On the one hand, Mygallons.com notes that people who signed up for the program in April of 2008, saved lots of money as gas prices soared. To the extent we no longer see big prices increase, however, such savings may not occur. Of course, the ability to redeem unused gallons may minimize this concern. On the other hand, there are fees associated with the cards usage that may undercut any savings. First is the most obvious $29.95 annual fee. Second, however, if you purchase more gas than you have in your account, you must pay the actual cost of the gas plus a $15 overdraft fee. To protect against this possibility, you can enroll in an automatic repurchase plan for $39.95, which plan automatically repurchases more fuel when your balance drops below 15 gallons. In most cases there also appears to be a $1.95 re-loading fee when you buy more gallons. Then too, the pre-purchase price is for regular unleaded so if you buy premium you must pay the difference in cost. All of these fees reveal that consumers must be careful to watch their account balance to ensure that they reap more in savings than fees.

And then there is this concern—how exactly does this company make money? Indeed, the company seems to have to generate enough revenue to pay the difference between consumers’ pre-purchased price and the current price of gas as well as earn some profit or else it could go under, leaving cardholders with useless plastic. In this regard, the company will be able to make use of the upfront annual fees as well as the pre-purchased amounts, over 80% of which the company says will be invested in “money markets and U.S. government backed notes.” Hmmmm . . .

And finally, the gas program does not work unless the cards are honored by gas stations. Unfortunately, shorty after the company's public launch, its provider of fuel card services indicated that it would not support the program, and hence apparently would not honor issued fuel cards. Because this appeared to be inconsistent with MyGallon.com’s claim that its cards would be honored across the country, the Better Business Bureau of South Florida (where the company is headquartered) gave the company an “F” rating. Now, after talks with MyGallons.com representatives, the SFBBB has revised its rating to “NR.” As of now, it appears that MyGallons.com does not have a vendor able to process transactions with gas stations, and hence has suspended acceptance of new membership fees until a vendor can be secured. MyGallons.com apparently also has agreed to refund consumers’ cards and give them a free one year membership once a provider is located.

These developments suggest that this may be a program good in theory but difficult to implement. And yet, it should be noted that apparently when the company first issued cards in April 2008, there was a vendor in place and cardholders did in fact reap some benefits. So perhaps it is something that can work again, and that at least would be some positive economic news.

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