post – I Smell Something, and it Ain’t Gasoline

I can’t believe all the positive reviews of MyGallons on decent blogs with sizeable readership… have we all become so naive as to believe anything that promises relief from the gasoline squeeze?

At least Mashable is doubtful, and Autoblog warns it may be a scam.  So what’s this all about?

A newly launched service that allows you to prepay for gas at today’s prices, then fill up your car using the MyGallons debit card at your locked-in price.  You pay an annual membership fee ranging between $30-$40, and $1.95 every time you reload the card.

Jeff Nolan looks at how this might (or not) work from the consumer / small business side, and concludes:

For this to work for consumers the bar is steep. First and foremost, you have to consume enough fuel to make the incremental cost savings exceed the fees you are paying, and because the savings you can achieve are a function of the time between when you load the card and then use it, well you have to pre-purchase a hell of a lot of fuel to get to the point where the price differential naturally widens.

I’m more in the other side, how is this to become a sustainable business?  After all, you’re locked-in price and debit card is only worth anything as long as the company that backs it up is still in business.

I could see the model work in a “normal” fluctuating market, where the price fluctuation, along with the membership fees and one-time charges all work out to the company’s benefit.   But in the current market with steadily climbing prices, their core business, “betting” on the gas price is a losing proposition, except for the membership fees, so they need a lot of longevity to stay solvent until they see gas prices decline.  They are either “loaded” and have huge credit, which I doubt, or will have to be very smart putting  the upfront customer payments to work: they have to find very lucrative short-term investments that grow faster than the gasoline index.

And when they see relief – i.e. gas prices start to drop – they will profit on existing deposits, but it’s also the end game: new deposits will dry up, as they have no business model for a declining market (customers can’t short the market).

But that’s long-term speculation, let’s focus on the immediate issues.   MyGallons  does not have a banking partner payment network to support their debit cards.  The Launch press release stated a week ago:

…the gas redemption program uses the Voyager fleet network, owned by US Bank, which is accepted at over 95% of gas stations nationwide.

As it turns out, they were only in negotiations with US Bank, which decided to pull out.  For this very reason the Better Business Bureau assigned MyGallons an F, their worst rating.   Not having a financial network has not stopped MyGallons from signing up new users, in fact, according to Founder, President Steve Verona, over 6,000 signed up in the first week.  Will the company be able to issue the debit cards?  The promise 4-6 weeks delivery, so that buys them some time.   The information on the website is still misleading:

MyGallons has learned that its prior vendor, GoGas Fleet, the reselling partner for US Bank’s Voyager Network, is no longer able to honor our agreement  [ there was no agreement! ] to provide its services to our members. MyGallons is currently in negotiations to team with one of the competing national payment networks to support our exciting program to ease the pain of rising gas prices.

Talk about Mr. Verona, different sources know his background quite differently.   The Miami Herald, his home paper:

“A former consultant for technology companies, Verona has been trading commodities and currencies since he was 13.”

The Los Angeles Times:

Verona, 39, has been involved in a string of companies including DB Net Ventures Inc. in Upper Darby, Pa.; Jewish Jeans Clothing in Columbus, Ohio; and an online store called Pursue Peace Clothing. Verona confirmed that he filed for personal bankruptcy in Ohio in 2001.

Oh, well, at least he gas relevant experience: bankruptcy proceedings.

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  1. Zoli, thanks for pointing that out. I also thought the idea felt a little fishy.

    However, big corporations have been essentially doing this very thing for a long time: buying hedges against fluctuations in one thing or another be it food, currencies or even fuel.

    I suppose it could be a profitable model provided MyGallons found someone to underwrite a large hedge against gas for X and then he effectively resold that for a markup. I suspect though that even if he did that, his prices would be even less attractive than he’s publishing now.

    The newer story of the First Fuel Bank over at Autoblog seems to be a more legit version of this idea though I haven’t really dug into it.

  2. Well, it wouldn’t take long for any savings to disappear fast if the company went out of business. What is scary is using this model, the company could run for a considerable time possibly in the red… using future purchase money to pay for today’s losses. At some point… either gas falls and the company wins… or the company goes bankrupt… and the company probably still wins.

  3. you are so wrong – us bank is trying to stop this company for launching and being successful for a reason – I think that is the real story

  4. Well, then give us the reason…

  5. After over-hearing about this website and business model at a bar today at lunch, I did some hard thinking as an honest banker and currency trader. After reading the website for it reeks of all of the warning signs bankers at all levels are given in compliance training. Lets see, I pay this chap $40 to get in, deposit money with him that he will later re-pay as prices adjust? Two big red flag events come to mind. Number 1: PYRAMID SCHEME. Number 2: OFFSHORE MONEY LAUNDERING. What a way for a drug dealer to launder money!! wire Colombian Pesos to mygallons,com claiming to buy gas for your boat in Miami, then withdraw the money in USD. There u go, laundered! No wonder US BANK pulled out.

  6. A situation like this occurred to me too. It was one year ago when I also smelled something similar to gasoline. And indeed it wasn’t, it was something related to some leaks of a certain substance from the water.

  7. When we get over the latest panic about gas prices, we will still want to tow boats and take our families to the lake or drive to the amusement park,
    and it is very likely that we will be burning gasoline to get there


  1. […] Go to the author’s original blog: – I Smell Something, and it Ain’t Gasoline […]

  2. […] Just ten days ago I reported on, a service that would allow consumers to hedge against future gas price increases.  Several things, including the business model and the founder’s background just “didn’t click”, so I was suspicious: I Smell Something, and it Ain’t Gasoline […]

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