I'm a comparison shopper. Before I buy anything, from boots to bed linens, I compare brands and prices. So, when a neighborhood painter told me recently that he saved a lot of money last winter buying heating oil from a supplier I never heard of, I decided to apply my shopping prowess to that commodity so that I could learn how to buy the cheapest heating oil. I made a few calls, and picked up some interesting tidbits from local suppliers that should interest anyone with oil heat.
The only sure way to save a significant amount of money on your per-gallon heating oil cost is to buy your oil from a C.O.D. supplier. The one my painter friend uses is in Newark, New Jersey. They do not offer a service contract, they simply deliver the oil when you order it and accept cash payment. You need to place an order each time you need oil. There is no automatic delivery. And you pay the spot price, whatever that is at the time of purchase.
If you use a C.O.D. supplier, you are also responsible for any service to your oil burner. That means you need to employ and pay a separate company to tune up your system. I was told that the annual cleaning that every system should have for greater efficiency and safety, when purchased independently, usually costs around $200. And don't forget that when your furnace conks out in the middle of January, you'll need to find your own service company to make a quick repair before your pipes freeze.
Full Service Lends Security
Full-service oil suppliers provide more security and more convenience, but their per-gallon oil costs are higher. There are also some differences among full-service companies, so it's worth doing your homework. I checked out two in our area, but it would be valuable to explore more (maybe for another article.)
Heating oil prices fluctuate each day, and all full-service companiesat the average monthly market price. Considering the volatility of the market, this approach can make budgeting difficult, because the price can fluctuate from delivery to delivery.
Lock-In Buys Price Certainty
If budgeting your costs is your priority, there's a second option called a fixed-price plan or lock-in. At the very least, this buys you some price certainty—you can fairly accurately estimate your maximum heating oil cost for the year if you have a good idea of how much oil you normally use. But if market prices drop, you're out of luck.
There's a third option called a capped plan. The capped price is always higher than the fixed price. But, with a capped price plan, you can obtain oil at the lower price if the spot market declines. Be careful, though. You need to ask your company if they charge for the privilege of buying below the cap price, and , if so, how much. This is called a cap fee, and it can be fairly expensive.
In our area, a spokesperson for our supplier told me that the company is setting their price cap this season at $2.699 per gallon if the buyer opts to pay in eight separate payments. That's called the “Silver Special.” Their cap is $2.599 per gallon if the buyer makes one payment to cover the entire season. That buyer is paying for the “Gold Special.” It costs $25 to join either of these two “Buyer's Club” plans. In addition, if you want to be able to buy at the lower price if the market falls, you need to pay $180 for a price-drop protection plan. That's a total of $205.
Under this plan, if the market spot price of heating oil is lower that the lock-in price on the day of your delivery, your account will be credited for the difference at the end of the season. This also applies to a maximum purchase of 1,200 gallons, which is probably more than most households would use in a single season.
Company Cap Terms Vary
The other company I contacted in our area, also offers a market price, fixed price and capped price plan. But the terns of their cap plan are different. Their capped price this winter is $2.69 per gallon. Unlike our supplier, they do not charge a cap fee. If the spot price drops below the cap, you will get your oil at a lower price. Maybe, for us, it's time to consider changing suppliers!
Here are a few questions to ask your heating oil supplier:
--Do you have a fixed-price plan, and if so, what is your fixed price for the season?
--Do you have a capped (or ceiling) price plan?
--If so, is there a cap fee (or price drop protection fee) and how much is it?
--What is your capped price?
--Is there a maximum quantity that can be purchased on your plan, and what is it?