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Heating Oil Prices Saturday, December 20, 2014 6:05 PM

Home Heating Oil - A How to Guide on Getting Cheap Prices.

As the heating season begins again, the annual uncertainty of oil prices concern the American home heating oil consumer.  Even the best analysts cannot accurately predict the price of oil from week to week, much less over an entire season.  In fact, Bloomberg.com surveys twenty to thirty oil market analysts each week and asks them what they think will happen to the price of oil the following week. After over four years of this study, the experts are only correct 50% of the time.  If the experts are only as reliable as flipping a coin, how can the average consumer know if they are getting a fair rate for their heating oil?

Typically, a full service home heating oil company will offer a number of options for their customers to purchase heating oil each season.  These options are usually available for automatic delivery customers only.  The first option can be a fixed rate for the entire season, and must be locked in by a certain date.  By securing a known quantity of oil to be delivered throughout the season, the local oil company can purchase futures to set a fixed price for their fixed rate customers.  The good thing for the consumer is that they know exactly how much they will pay for heating their home for the winter.  On the other hand, if oil prices fall during the season, the consumer ends up paying more than they would have if they purchased at the variable spot price. 

Another option for automatic oil customers is having a cap price set by the local oil company.  A cap price is the highest price per gallon the customer will pay during that heating season.  Unfortunately, in many cases, the cap price is exactly what the customer ends up paying for each delivery, whether oil prices rise or fall.  And since they have a contract, there is no recourse for the customer who ends up paying too much.  Once again, like having a fixed rate, a cap price is available mostly as a “feel good” benefit for the consumer.  Historically, since oil prices fluctuate daily and local oil companies require an additional charge to lock in a fixed rate or cap price, you are better off paying the market price when you have your oil delivered.  The additional charge can add between 5 to 15 cents per gallon over the course of the heating season.  If not taken into consideration when agreeing to price, you can end up paying too much every year.

Automatic customers can also have their oil delivered based on the market price rather then having a fixed or capped price.  Before agreeing to this way of purchasing oil, ask for historical market rate prices from your local company, and compare to what you did, or would have paid previously.  Do not forget to factor in any additional charges for locking into a fixed or capped price.

As an automatic customer, there are additional costs associated in maintaining your account by your oil company.  They use a degree day system, and monitor your usage to insure that you do not run out of oil, especially on a cold winter’s night.  This is why automatic delivery customers typically pay more per gallon than COD customers.  What you are paying for is that extra peace of mind, knowing you will keep warm all winter without running out of oil unexpectedly.

Just as important as having your oil automatically delivered, and not worrying about running out, is having excellent service available when needed for your heating system.  A system should be cleaned and tuned each year to work at optimum performance.  A company that provides 24 hour 7 day a week emergency service is very important.  If you have a problem in the middle of cold winter night, you don’t want to hear that someone will come by during normal business hours.  You want heat now, especially if there are young children or elderly people in your home. 

If price is the biggest issue for you as a customer, you may want to consider a reputable COD company.  By paying cash on delivery, you will get the best price for oil on any given day, and since all oil is the same, we recommend you shop around for the best price and service.  Since not all COD companies offer service, you must remember to service your system each year.

Another option that is becoming increasingly popular over the past few years is purchasing heating oil through a buying group.  These buying groups help protect their members by monitoring service and price for them.  When choosing a buying group that is right for you, find out if they work with multiple oil companies in your area or not.  This is extremely important, because if they only have one company in your area that they work with, they may not have the same bargaining power as one that works with numerous companies, and let them compete for your business.  Additionally, you should work with a buying group that has no sign-up or membership fees.  You should be free to switch to another company if not totally satisfied with no cancellation fees.  If you need assistance in finding a buying group in your area, you can find them fairly easily on the internet today. 

So in closing, do a little homework before choosing the method of oil delivery that is right for you.  Service is just as important as price, and there are reputable companies out there that will give you both great service with a fair price.  No one has a crystal ball to know what the price of oil will be in the future; however, if you work with the right company or group, one that is loyal to their customers, you will have peace of mind and be warm all winter long.

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