Tag Archives: Prices Extremely Volatile

Home Heating Oil Prices Set to Become Extremely Volatile

For decades, the fuel of choice for many homeowners living in cool-weather states has been heating oil. The fluctuation of heating oil prices over the past few years has caused a great deal of concern, as people worry if they can afford to keep warm this winter. Sadly, the reality is that it will probably cost more to heat your home this winter than in years past.

Which Way Will Heating Oil Prices Go?

Frankly no one truly knows. There are a lot of professional traders trying to make money betting exactly on this question. But most homeowners don’t want to bet on the price of heating oil. While they would like to pay as little as possible, more importantly they want some kind of stability in the price.

Benefits of a Fixed Heating Oil Price Plan

With so much volatility in prices, the fixed price plan has become quite popular with consumers. Essentially the consumer and supplier agree on a fixed price for the entire heating season. The consumer also agrees to purchase an estimated amount of fuel during that time. The benefit to the consumer is that they know their cost is fixed.

Plus, the company sets the client up on automatic delivery and estimates when their tank needs to get topped up. That allows the supplier to better schedule their time and ensure the client receives better service.

Generally the estimates are pretty good since their software calculates customer usage based on degree days. If it’s colder than normal the supplier knows approximately how much extra fuel will be used. Naturally, the opposite applies if it’s warmer.

Drawbacks of a Fixed Price Plan

Unfortunately there’s no such things as a free lunch. The customer pays a premium in return for the security of a locked-in price for the entire season. Exactly how much is that premium? It’s very difficult to calculate, because it’s impossible to tell how much the day-to-day (spot) price of heating oil will change in the coming season. Generally speaking, the heating oil price will need to move up a fair amount, in order to benefit from that locked-in price.

The second concern is that you are often required to purchase a certain amount of fuel. Though the amount is normally reasonable (based on prior usage), there’s no guarantee you will use that much in the coming season. What if the winter is warmer than usual?

Also remember that when you sign up for a fixed heating oil price plan, you’re entering into a binding contract. Once the contract is signed it’s usually not easy to get out, not without some kind of penalty.

Is a Fixed Plan Right for You?

Everyone’s situation is unique and there is no right answer. What’s important is to take time to objectively think things though. While it may feel comforting to lock in a fixed price for your heating oil this coming season, it’s vital that you read through any contract carefully before you sign it.