jueves, mayo 29, 2008

Chrysler: Selling oil short

I've read many critics to Chrysler's (Dodge and Jeep) new refuel program. It actually fixes the price of fuel at $2.99 for three years, for up to a certain amount of gallons. Critics say that it's encouraging the use of fossil fuels... (but on the other hand other critics say that it only goes up to the equivalent of 12.000 miles a year, whilst the American average is 15.000, so I don't see much of an encourage... ). Thomas Friedman has even compare it to "offering discounted cigarettes to teenagers"! Quite sincerely I don't see the problem: I don't believe it's going to marginally change the consumption of fuel in relevant ways. What I do see is a good example of a financial instrument (short selling) turned into a marketing tool. Now the real danger is that short sells are dangerous, since the losses may be way beyond any estimations: what if the price of fuel goes up to $10, $15 or $20 per gallon? In theory there's no limit for it... not to mention that as far as I read the offer it doesn't exclude the potential taxes that may be created in the future. In the good scenario this is an original marketing tool, in the bad one this may cause heavy losses to the firms involved, unless they take cautionary options to hedge the risk.

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