Allen’s Oil used to offer pre-buy oil contracts for years as a way to lock in oil prices during the summer while they were cheapest. For the past four seasons, however, we have not continued this practice. Some customers have wondered why we have stopped this. This Hartford Courant article explains why some other oil delivery companies are following suit.
Most of the reasons are well explained in the article:
Around the state, fewer heating oil dealers are offering customers fixed-price plans this winter with many citing the oil market’s volatility as their reason for discontinuing the option. The U.S. Department of Energy is predicting that this winter’s heating oil prices will be among the highest ever.
Just as they sound, fixed-price plans guarantee a fixed price per gallon of heating oil over the course of the heating season, which typically runs from November to April. It can be a good deal for consumers if prices go up, but if they drop significantly, everyone’s unhappy.
Since 2008, oil prices have been so volatile that the summer months have not necessarily been the cheapest months to buy oil, but they are the prices used to pre-buy oil. When you buy a pre-buy contract, the oil company must purchase at least 85,000 gallons of heating oil at the time of the pre-buy offer end at the price quoted during the summer. This worked out well for everyone for a while. However, when the market rate of oil plummets during the winter (as it has in the past few years), a customer in a pre-buy contract is still using the oil the bought in the summer at the higher rate while C.O.D. customers pay much less. The oil company is then faced with extremely angry customers who don’t feel they should be paying as much, even though they are contractually obligated to, and that deeply effects the trust between the customer and the company.
We decided to avoid that all together. We do not want our customers to resent us for any reason and we want them to know that we rise and fall with the oil prices as well – higher oil prices DOES NOT mean our small company makes more money per gallon. It just means higher costs for us as well. Because we want to be the honest, upfront broker for you, we decided that the market price is what we would base our sales on.
But because C.O.D. prices can be a daunting bill to pay during the cold months, we offer very convenient budget plans that spread payments over ten months based on your usage average for the past couple years at the project rate of oil prices.
Please feel free to contact us in any way with question or to find out our daily price of oil, i post it regularly on our twitter account. We strongly feel we are all in this together!
