The Whole Picture

Lock in Low Gas Prices

Over the last 30 years, gasoline has not gone up much more than inflation. In fact, it usually lags inflation. Perhaps that will change in the future, but at this point, investing in TIPS would do just as well in the long run.

Once we add future taxes and carbon trading to the mix, gas prices at the pump will likely go up much more than the actual price of gas or oil. I assume that investing in UGA will not help offset these extra expenses. Meanwhile, these extra expenses will likely reduce demand, thereby reducing the underlying prices of gas and oil. In this scenario, hedging with UGA could result in an investment loss while still paying more at the pump.