Yearly prepaid heating oil contract a good idea?

Dave_61

I normally think prepaid contracts are not a good deal. I’m in W Mass and received an email from my heating oil company to pre purchase next year’s oil. It’s substantially cheaper than anything I paid this year. Fifty to 60 cents per gallon cheaper. I normally am on will call for the lowest price, and this is much less. We used about 800 gallons this past winter. What do you guys think? I know crude oil prices have dropped some. I’m not sure if I’m allowed to mention the per gallon price. I will if that’s allowed. Thanks.

pecmsg

like everything else it’s a gamble! Sometimes you win sometimes you lose the odds are in the favor of the house

Jamie Hall

Always have used them. As @pecmsg said, it's a gamble. Some years you win, some you lose…

ChrisJ

There's another risk besides the price of fuel changing.

An oil company that was in our area for many many years went out of business. From what I saw anyone that had prepaid them was up a creek.

I don't know what the chances of that happening are but apparently it is a possibility.

Mad Dog_2

Its this part of a service contract for 24/7 365 Response? Mad Dog

jesmed1

I'm in eastern MA, and we burn about 1200 gallons per year in our condo building. We joined the Green Energy Consumers Alliance a few years ago, and it has saved us a lot in heating oil costs.

https://www.greenenergyconsumers.org/heatingoil

The way it works is (1) you join and pay them an annual $25 fee, then (2) you get their pre-negotiated price with your local full-service oil dealer, and that pre-negotiated price is typically 30-50 cents lower than the MA average retail price. It's not a fixed price per se, but rather a fixed mark-up based on the daily wholesale spot price. So while your daily price fluctuates, you know you're paying a fixed, lower markup than you normally would.

I've been able to compare our Green Energy daily prices with MA average retail prices, and I figure we typically save $300-$400 per year over the MA average with Green Energy (you would save somewhat less based on your lower oil use).

I've found the Green Energy fixed markup pricing model works best when oil prices are falling, because typically the retailers won't lower their prices as fast as their wholesale prices are falling, so they profit from the spread for as long as they can before dropping their retail prices. But the Green Energy fixed markup means that the Green Energy dealers have to pass those falling wholesale prices on to you immediately. So when prices are falling, it's not uncommon for the Green Energy prices to be 50 cents or more lower than the MA average.

Once you sign up you can check their daily price "dashboard" and see how the day's Green Energy oil price compares with the MA average. Some days it'll be 20 cents lower than average, and some days it'll be 50 cents lower than average, depending on market fluctuations. I've checked their numbers against MA state government published oil pricing numbers, so I know they are correct.

Dave_61

Thanks. Will check it out

MaxMercy

If the buy-now price for next year is that low, I expect you will be able to find it even cheaper using one of the heating oil price sites on line. That's good news for everyone if the speculation for next year is that low, including gasoline prices.

Regarding pre-paying - I'd say that in 30 years of oil heat where I am, there might have been two seasons where it would have been to my advantage to pre-pay for the oil out of the 30, so I never do the pre-pay plan.

Jamie Hall

One minor thing I might mention. Related to pre-pay, but not at all the same: one can often get a slight price break for signing up for automatic delivery from a good, reliable, oil company. It is often not as cheap, however, as shopping around when you need oil and paying a spot price.

The upside is that if it really is a reliable oil company — one that has been around for a while — and they know how much you use, they will have the oil available when you need it — and if my experience is a guide, will stretch to make those deliveries even when the weather is atrocious. Spot purchases… not so much.

You may save a little on shopping around, but when you are faced with a longish cold spell and the tank is getting low…

Depends a lot on how much oil you are going to use. A couple of fills per winter, maybe not an issue. A tank every week to ten days, maybe reliability factors in a little more.

Dave_61

https://forum.heatinghelp.com/discussion/comment/1856895#Comment_1856895

I looked into the Green Energy Consumers Alliance. It would be automatic delivery and tied to the wholesale price of oil. It is currently less than I am paying for the cash price, so I signed up with the cooperative for a year. Thanks again. I appreciate the info.