These programs are still being offered, but due to the volatility of the oil market, few oil providers now offer fixed rate pricing. Back in July of 2008, for example, there was a run-up in oil prices to a record $147 a barrel. Fearing prices would rise even further, some consumers locked into a fixed rate price at that time. But by winter the price per barrel had fallen to $40, which translated to a $2.00 per gallon difference in home heating oil cost. To avoid overpaying for their oil by thousands of dollars over the winter months, many customers opted to pay hundreds of dollars in cancellation fees to get out of fixed-rate contracts. As a result, a number of these oil dealers suffered major losses or closed their doors, especially small family-owned businesses. Many vowed to never again offer fixed pricing. Price caps are now often the preferred locked-in offering for both consumer and dealer.
When you pay the market price for heating oil, typically no yearly contract is involved. You are simply charged the current market rate the day of your oil delivery. Your pricing goes up and down with the market for better or worse.
When you pre-buy your heating oil, you pay preseason for your total estimated oil usage for the entire winter. The price you pay is usually competitive with the current market pricing on the day you sign your contract. If winter heating oil prices rise, you’ll come out ahead. If they go down, you’ve made a gamble and lost. If you’ve paid for too little oil, you’ll have to pay market prices for the rest of the winter season. Pre-Buy plans can be great for those who can safely afford to pay for their heating oil ahead of time and the price of oil rises over the winter season. A worst-case scenario to be considered is the loss of upfront payments should your oil company go out of business or file for bankruptcy.
A Little Homework Can Help with Payment Plan Decision
Go online or call your local consumer affairs office. If it’s like mine, you’ll find information on home heating oil prices (in cents per gallon) by month for the current and previous year. Have prices steadily climbed? Have prices been erratic – going up and down?
Also visit the US Energy Information Administration (EIA) website, http://www.eia.gov/, where on their homepage there’s a link to a valuable feature entitled “Short-Term Energy Outlook.” It includes information on projected heating costs for the coming winter season as well as projected winter fuel costs by specific fuel and region. A summary of winter weather forecasts for the US is also provided.
For a more comprehensive winter weather outlook, the respected Farmers’ Almanac, http://www.almanac.com/weather, has a Winter Outlook page that outlines what in store weather-wise for the coming winter. (Their prediction for the 2013-2014 winter season: Get out your woolies and snow shovels.)
Full-Service Versus C.O.D. And “Hybrid” Oil Companies
Full-service oil companies offer automatic delivery, service contracts, budget plans, 24-hour emergency service, and – less often today – locked-in payment plans. A service contracts provides for an annual system maintenance visit and for most repair parts and costs. This annual cleaning and tune-up helps optimize performance and longevity of oil heating systems and can lower an annual heating bill up to 10 percent.
Some full-service providers also offer one or more discounts and/or special offers such as those for customer referrals, prompt payment, seniors and large deliveries. Customers are expected to make regular payments within 30 days.
C.O.D. discount dealers offer heavily discounted prices, but payments must be made in cash or credit card on the day of delivery. The bottom line is that you are paying for the heating oil and nothing else; i.e., no service contract, no yearly maintenance, no budget plans, and no fixed rates. If your furnace breaks downs, you’ll be paying those repair costs in full. You’ll also need to keep track of your oil tank levels; discount dealers typically do not offer automatic delivery.
There are also a number of “hybrid” dealers. These companies combine features of both full-service and C.O.D. companies. Fuel oil prices are discounted – but generally not as much as C.O.D. dealers – and service contracts are offered. Payment in cash or credit is due on delivery, or within five to 10 days.
Full-service dealers generally charge the highest overall prices, but many offer free or discounted one-year contracts. This arrangement can save money in the long term; i.e., the included annual maintenance and tuning of heating systems save energy and money, and most furnace repair and parts are provided free of cost to the contracted customer. C.O.D. companies offer the lowest prices per gallon, and hybrid companies are generally somewhere in between.
Choose Your Local Oil Provider
Read these words and commit them to memory: Each and every year you – the homeowner – need to spend an hour or two calling at least a half dozen local oil companies; a dozen would be best. By shopping around for the best price and service, it should easily save you hundreds of dollars on your heating bills this winter. If you have a current contract, time your calls for a few weeks before it expires.
Questions should include:
- How long have you been in business?
- What is your price per gallon for the market rate; and if offered, what is your price per gallon for your fixed and capped rate? Do you offer any special discounts?
- Is the service contract included in the price, and if not, how much is it? What does it include?
- How long is the contract term, and when does it start and end? (Some companies end all contracts on a particular date; i.e., every June 1, no matter when you sign on.)
- What is the company policy if you choose to go with another home heating oil provider before your contract term has ended? What, if any, penalties will you pay?
The first red flag is often established upon your first phone call to a potential oil dealer. Did someone actually answer the phone, or did you get a busy signal or a voice message? Was the company rep pleasant or surly? Were you told that someone would get back to you, but no one did? If your burner breaks down in February, you’ll want to know you’ll be able to get through to your oil company immediately in order to get needed repairs.
Geography, peace of mind, and the age and condition of your furnace should also play an integral part in your decision making. For example, someone with a 15-year-old furnace living in the Northeast might want the security of a full-service oil company with 24-hour emergency service and a contract that will protect against unexpected repair costs. In contrast, an individual living in the South with a brand new burner might be better served by paying for discounted fuel C.O.D. and simply paying to have a yearly tune-up.
When you do choose a heating oil provider, make sure that the company and its technicians are fully certified, licensed and insured. You’ll also want an established reputable company. Check with your local consumer affairs office and Better Business Bureau (http://www.bbb.org/) for information about the number and resolution of past customer complaints.
Oil Buying Groups
Consider joining an oil buying group in your area. These oil buying cooperatives use the collective buying power of members to negotiate considerable discounts on heating oil, service and heating equipment. Participating oil dealers benefit by receiving a high volume of guaranteed, repeat business and then in turn are able to significantly reduce their profit margins from those charged to the general public.
One of the larger oil buying groups is Pilgrim Oil which operates in eleven states. Membership is free, and both automatic and C.O.D. deliveries are offered. Depending on the member’s geographical location, the service contract may be free as well. Savings on heating oil average 22 to 32 cents a gallon.
Heating Assistance Programs
There are local, state and federal government heating assistance programs available for homeowners who meet certain criteria; i.e., low income, the elderly or disabled. To find out if you’re eligible, go to the “Benefits Finder,” http://www.benefits.gov/. This is a great site that acts as a single source for locating assistance programs at all levels of government. You can get results by completing the Benefits Finder questionnaire, or by browsing by state, federal agency or category (energy assistance).
Heating assistance programs in all 50 states include the Low Income Home Energy Assistance Program (LIHEAP) and the Weatherization Assistance Program. LIHEAP provides assistance in paying energy bills, while the Weatherization program provides for the installation of energy efficient improvements that reduce energy costs. Each state has slightly different criteria.
Another great source for free energy assistance is your local Electric company. NY’s Long Island Power Authority (LIPA), for example, offers a number of energy programs including the Residential Energy Affordability Partnership (REAP) program. Income–eligible customers receive a visit from a REAP technician who typically installs energy-saving measures in the home that will make the home healthier, safer and the most energy efficient... at no cost to the customer.
Remember... with a few hours of your time, you the homeowner and consumer can have the satisfaction of knowing you’re paying the best possible price for your heating oil.
Copyright 2013, Attard Communications, Inc.
To learn how to further reduce heating costs, read Business Know-How's article Slash Heating Costs this Winter, where we list cost-free ways to lower heating bills as well as weatherization applications that lead to greater energy efficiency and savings. Follow this link to subscribe to the free Business Know-How Newsletter.