On my internet radio show, Surviving the Times, I take time out every Fall season to report on the position of energy costs. And, every August I remind people that that month is the best time of the year to make your arrangements for your heating oil contracts. This year will be no different, as I can see at this point, since the pricing of the futures contracts follow the same trend even though the price is going up.

You can keep your fuel costs low by entering into a fixed contract, of which there are two basic types for your home energy needs. One of these types is a fixed price contract, and the other is a capped price contract. You can get burned easily on either one if you are not careful, but it is much better than praying that the price of oil won’t climb beyond your ability to pay for it.

Here are a few general points to consider, and bear in mind as you search for an oil supplier;

  • All contracts for the retail sale of home heating oil must be in writing.
  • Read all the terms and conditions outlined in the contract before signing; keep a copy for your personal records. Pay extra attention to the small print.
  • Be familiar with the types of contracts a company offers for price protection programs.
  • Usually, fuel contractors offering pre-paid fuel contracts must show upon request that they have pre-purchased the fuel or have obtained a bond against fuel sales.
  • Be aware of any default terms that may void the contract.
  • Check on references of customers who have had contracts with the oil company.
  • If you think that a fuel company has not abided by its contract or has used unfair or deceptive business practices, you can generally approach or contact your state agency that covers the issues in question.

States have different regulatory requirements for not only supplying fuel oil, but in how the individual contract/agreements can be set up, so I would recommend you investigate thoroughly the laws pertaining to your state before committing to any deals.

Fixed Price Contracts

Fixed price contracts are simply that, a contract that says you pay X number of dollars per gallon of fuel for the duration of the contract. Normally, a fuel dealer is able to provide for this pricing structure because he either has pre-purchased the fuel under contract, or has made an agreement with a wholesale supplier via a similar contract scheme as you have agreed to with the retail dealer. Initially, the price per gallon may be higher than the market price or advertised price, and you may feel as though the dealer is screwing you, but as demand for heating fuel increases, so doesn’t the market price. With a fixed price contract, you will pay that same amount no matter how high the market price gets. You will be happy when the price soars, but not so happy when it does not. It is in fact a gamble, but in my experience, it is a gamble well worth taking.

The commodities markets show a steadily increasing price on the wholesale market, and I would guess that we may easily see $4.50 to $4.75 by the end of January, at least in the area I live in at the moment. Currently, the price ranges from $3.299 to $3.539 per gallon in this same area. And there are indications that the price may in fact top $5.00 per gallon, though I do not see prices in this area getting that high.

Capped Price Contracts

In a capped price contract the price per gallon is free to float up and down, but it will not exceed the top price set between you and your retailer. This scheme may have some benefits that are not readily apparent, such as the possibility that some extant reason may keep the price of oil lower than expected for the entirety of the season, which would be a bummer for those who chose the fixed price scheme. But again, I do not at this time see any such thing happening in the markets this year.

No matter which way you chose to pay for these contracts, you will always have to either prepay the entire amount owed to the dealer, or agree to installments, which sometimes come with added surprises, such as processing fees and high interest rates for late payments. Either way, you need to be able to guarantee that you can in fact pay for the fuel. This usually leaves those who are poor out of the loop as their credit score suck like a broken Hoover.

It is best that you investigate now as to what your options are for your situation. No matter what the forecast says, it is going to be a cold winter, and heating your home is something only the truly obtuse will put off till the last minute.

As I stated before, August is always the best month to buy oil for heating, so keep an eye out for pricing deals that will allow you to save big during the winter months. Always read, and reread the contracts before signing, pay attention to the small print, and if you don’t understand something on the contract, get someone to explain it before signing. Another thing to watch for is the financial stability of the retailer you are looking at to buy your heating oil from. Are they stable enough that they won’t pull the plug from you in the middle of the winter? I have seen too many instances where dealers have gone under in the middle of the season because they failed to anticipate market conditions far enough in advance. Many good people have been literally left in the cold because of no fault of their own.

Pay attention, do your research and prepare for the coming times. Don’t be cold this winter because you thought a better deal might come along.

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