If you use an oil burning furnace to heat your home, you’re likely just as happy as me when the warmer summer months come and the furnace runs less. During our coldest month (February) we burned through nearly a full tank (275 gallons) of oil. This would of equated to a monthly heating bill of over $1100 had we paid the “spot” price for the oil during that month. Every time I heard the furnance turn I would say to myself “there goes another $20″.
Fortunately, our local oil delivery company has several payment options that can help you avoid such outrageous monthly bills.
During the summer of 2007 (before oil prices went through the roof) we locked in what our oil delivery company calls the “Budget Plan”. Basically, if we agreed to buy all of our oil through them for the following winter season, they would guarantee that we would never pay more than $2.76 a gallon for fuel.
Furthermore, the delivery company spread the payments out over 10 months using our household fuel consumption from the year before as a baseline, these helped avoid those whopping $1000+ monthly fuel bills. Lastly, if the “spot” price for the fuel delivery was cheaper than the price we were locked in at, I would get the cheaper price.
To me the “budget plan” option was a no-brainer. As we all know, oil prices skyrocketed to nearly $5.00 a gallon last winter but no matter what, we were locked in at $2.76. The “Budget Plan” effectively cut my heating costs by 50% saving our household over $2000.
What do you do if your oil delivery company doesn’t have a “Budget Plan”?
Most oil delivery companies will still offer a “pre-pay” plan. I’m not a big fan of these plans because with oil prices as volatile as they are, you may end up paying more upfront for the oil than what the “spot” price may be later on in the winter. Typically, you can “pre-pay” or “pre-buy” your oil at a slight discount over the daily “spot” price for $.10-.15 a gallon cheaper. In my opinion, its just not worth the risk of being locked in if oil prices subside even a little bit. I like having the price protection that the “Budget Plan” provides.
One thing that you can do (if you haven’t already) is continue making oil payments into a designated savings account throughout the warmer months so that you will have a head start on your heating oil payments when the colder winter months roll around.
Won’t the fuel delivery company go bankrupt if they have to sell the oil so “cheap”.
This is what I thought at first. However, when you “pre-buy” or contract at a certain delivery price, the delivery company in turn “contracts” with their suppliers for oil at a certain price (with profit built in for them for distributing it to your house).
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{ 3 comments… read them below or add one }
Excellent ideas. Energy prices are going way up and this winter is going to cost a lot. I’m glad I have a little house. Wood burning may make a comeback.
I wish that my oil company had that program last year. lol!
Did you have to pay extra for the downside price protection?
It appears that this time around they are offering the same program but it is an extra $.25 a gallon for “downside price protection”!
Oh well, I guess that all good things must come to an end!
I feel fortunate to have been locked in over last winter!