Speculation of fuel prices at petrol pumps

Mr.G

Well-Known Member
#1
I invite all technical and quant analysts to give their views comments and suggestions in formulating a theory that will in purpose try to predict movement in the petrol and diesel prices.

To give you some background, fuel prices are changed fortnightly in India, What i propose is that if we can tell in a few days advance if the price will go up OR down, it will help in reducing losses and making profits to petroleum dealers.

We dont need to predict the extent of the movement, just the direction. Up or Down. I have been made to believe that we can do this through studying the past actions of the government at different price levels of crude.

Hope to read some helpful inputs soon......
 
#2
How is this relevant to trading. Surely prices can be predicted by following crude prices.

Most states have different tax structures for petroleum products so the prices could vary a lot.

Btw i don't think it affects the petroleum dealers a lot. Just with whats left in the bunk.
 

Mr.G

Well-Known Member
#4
How is this relevant to trading. Surely prices can be predicted by following crude prices.
Im trying to experiment with application of technical analysis on things other than just stocks.

Rates vary but increase or decrease in price is uniform across India.

Dealers are affected alot, whenever there is major price change the dealer bears the burden on the change of price of the stock, and at most times we have more than 20000 liters of fuel in our tanks. and usually a change of 3 rs in aggregate will cause a sizeable loss to us.
 

comm4300

Well-Known Member
#5
Im trying to experiment with application of technical analysis on things other than just stocks.

Rates vary but increase or decrease in price is uniform across India.

Dealers are affected alot, whenever there is major price change the dealer bears the burden on the change of price of the stock, and at most times we have more than 20000 liters of fuel in our tanks. and usually a change of 3 rs in aggregate will cause a sizeable loss to us.
If you are a dealer and are worried about inventory, why not hedge in MCX?

coz if you try to predict - you may be right a few times and wrong a lot of times. Since the inventory you mentioned is sizable, it is not wise to speculate.

try to come up with hedge ratio, hedge you inventory to that extent and be worry free. Southwest Airlines in USA hedges itself for Crude prices and is among the few airlines that has stayed profitable.


all the best.
 

Mr.G

Well-Known Member
#6
If you are a dealer and are worried about inventory, why not hedge in MCX?

coz if you try to predict - you may be right a few times and wrong a lot of times. Since the inventory you mentioned is sizable, it is not wise to speculate.

try to come up with hedge ratio, hedge you inventory to that extent and be worry free. Southwest Airlines in USA hedges itself for Crude prices and is among the few airlines that has stayed profitable.


all the best.
Brilliant solution! Can you explain this more? This sounds very interesting.
 

comm4300

Well-Known Member
#7
Brilliant solution! Can you explain this more? This sounds very interesting.
request you to please check

http://www.mcxindia.com/knowledgehub/Occasionalpapers/PDF/Benefits_of_Hedging.pdf

Also, if you are someone who plans to hedge in good qty (lakhs) you can call up MCX and have one of their official come to you and explain all the intricacies for free.


all the best.

PS - Hedging should remain hedging. Sometimes, hedger is tempted to speculate and ends up losing more than he bargained for. This required discipline.
 
Last edited:

mastermind007

Well-Known Member
#9
Brilliant solution! Can you explain this more? This sounds very interesting.
The whole concept of hedging is explained in "Way of the Turtle" by Curtis Faith book. PDF is freely available on net.
 
#10
I dont know if this will sound harsh to any dealer, but I must say it here as a consumer of fuel.

The dealers had free lunch for the past few years when the petrol and diesel prices were being adjusted every month to bring the price at par with cost!

Few dealers used to stop selling fuel on the last evening of the price hike just after the announcement of the hike.

Now they are digesting those free lunches!

BTW I am not a heavy user of fuel so it dont affect me that much.

But just shared my observation here.

Thank you.
 

Similar threads

Broker Special Offers

Intraday Higher Leverage

Save up to 90% in brokerage and get higher leverage for intraday trades.

Name:Phone:
Email:City:
State:
Are you a day trader?