Home heating oil is a huge expense for many people for at least 6 months of every year, sometimes more. Heating oil just as petroleum has a volatile retail price structure. Heating oil that was reasonably priced in one month can experience a shocking spike in price the next. People living in the northeast experienced near record heating oil prices last winter. The trend for heating oil has been dramatically upward for almost a decade; the cost for a gallon of home oil 10 years ago was $1.09/gallon, today it is close to $4.00.
Many customers experience cold snaps that can last for up to two weeks and double their heating oil costs for the month in just those few weeks. A customer can spend $300 for home heating oil (HHO) in December and see that cost skyrocket to over $700 for a January cold snap. The major question for many is;
“If heating oil prices are so high then why don’t people switch to natural gas?”
The basic answer to that is it is not always physically possible to run natural gas pipelines into some areas. Many of these areas are in the northeast, mid Atlantic and far west. Others rent from property owners who do not want to spend the cost of conversion to natural gas heating. HHO is a major expense; nationally the average natural gas user spent $724 over the winter months for heating, electricity costs for the same period were $957 and HHO costs were $2298.
How Can I Save on the Costs of Home Heating Oil?
One can utilize several methods to manage the cost of their heating with HHO. A buyer can always —
- Comparison Shop — The cheapest HHO provider last winter may not be the cheapest this winter. Diligent comparison-shopping can get you the best prices from season to season or even from month to month. Of course, it is always advisable before you switch oil suppliers to give your present supplier a chance to match the price of the cheaper provider.
- Buy HHO Off-Season — Fill up in the spring or summer months when demand is lower
- Join a Co-Op — the $25 to $30 dollars for the cost of joining a co-op will more than return that investment. Co-ops can negotiate better prices because they buy in bulk. Joining a co-op can save up to 20% per month for its members.
- Constantly Search for Company Discounts — Many HHO suppliers have discounts; commonly for senior citizens and tank fill-ups.
- Avoid as Many Fees as Possible — Many companies charge various fees or surcharges for delivery, fuel surcharges and premium fees for late night or bad weather deliveries. There may also be taxes that can be avoided by inquiring.
- Select the Best Price Plan for You — There are various options to buy HHO; market price, capped price and fixed price are the most common. For many the fixed price option works best, fixed price is also commonly known as an oil budget plan.
- Get A Great Oil Company — Learn how to find a good oil heating company, that will save you a ton of headaches!
The Oil Budgeting Plan
The best way to avoid the price spike that HHO users endure is to go with the oil budget plan. The practice of spreading your HHO costs throughout the year with 8 to 12 equal payments that can take the sting out of the winter month’s payments. These plans are generally based on usage in the same dwelling for the previous year. Oil spending plans either use a capped or fixed pricing structure that financially protects the buyer from huge price hikes due to market conditions.
Dealers usually encourage it’s customers to use budgeting plans, that way they can readily estimate their inventory and revenue for the coming year. Dealers that offer oil budgeting plans most commonly will use the fixed price that their full retail customers have paid. Dealers then take that price and multiply the approximated usage expected for your dwelling. They then divide that by the number of months of your budget plan. If you sign up for a budget plan after June or July a dealer may ask for 2 months in advance, but you may be able to negotiate paying 3 months over a 2 month period to get your plan started.
Occasionally a dealer has the option to change the pricing of your plan twice in a 12-month period, which usually happens when a spike or sharp drop in oil prices happens. Generally, these adjustments occur in December or February during their budget review period. If you receive a delivery during the budget review period and there has been a drop in oil prices, you will be charged at the Mass Energy budget level and receive a credit to your monthly bill.
Various Types of Oil Budgeting Plans
There are almost as many budgeting plans as there are heating oil companies. These plans are commonly structured to the region of the country and socio-economic factors of the specific community the oil company serves. The most common choices of plans are —
- Pre-Payment Plan — Regardless of market pricing this pre-payment plan ensures you will pay a set rate and less if, the market price drops. Most companies stipulate that you must pre-purchase a certain amount of oil (from 50% up to 80%) before the heating season begins. Generally, there is an upfront fee to cover the cost of the forecasting tools that ensure your low price. There are also discounts and rebate eligibility for customers that renew their service.
- Pre-Payment Fixed Plan — Protects you from market price increases because you are buying a set amount of HHO up front at a pre-determined price. However, this plan does not decrease or offer credit to your account if the price falls. This is a good service plan, and it does offer rebates for renewal.
- Installment Plan — Simply, your payments are spread out over 9 to 12 months instead of paying for each delivery. This plan calculates your estimated usage based on the previous year, and you are billed monthly for the based on that average. Commonly a customer is given the option of paying a fixed rate, or paying a fee for downside protection. In the instance of a price decrease, your downside protection fee will allow you to enjoy the price decrease by paying a lower monthly bill.
- Just Oil Capped Plan — This plan is a month-by-month payment on delivery plan that offers a set discount (usually 15cents to 25cents/gallon) for payment within 5 days of an oil delivery. You may have the option of paying an up-front fee for pricing protection. Many times, there is a guarantee that the price will not exceed a certain level.
Please be aware that many states offer home heating oil assistance and affordable energy programs that you may be eligible to join. Your oil company or local community social service office can inform you about these. Additionally it is best to explore these budget plans during the summer months or at least before the start of the heating season, that way you can shop around for the best plan for you.