Should I Lock In My Home Heating Oil Price?

What you can do to save money on your heating bill this winter 

As the winter season nears, people are asking if it’s best that they lock in a fixed price their home heating 
oil prices in order to save money. While it may seem like a good idea, there are some factors that you should consider before making a decision on this matter. 

December is still three months away but it is an admirable attitude to always prepare in advance. This is especially important at this time when home heating oil prices remain volatile along with the price of crude oil worldwide and people need to think about their fuel supply for heating purposes during the cold months. Add to this the rising rate of electricity consumers have to deal with.

The U.S. Department of Energy estimates that heating oil rates will an average $4.31 per gallon this year which is an increase of about 20 percent from last year’s level. This only means that consumers will have to pay more to be assured of their usual fuel supply to keep them warm during winter.

With this uncertainty and impending energy crisis, it is indeed a good option to lock in a fixed per-gallon oil price with a dealer or set on a price cap. With a steady rate, customers need not worry when oil prices fluctuate and go up again.

Locking in home heating oil price involves consumers and dealers agreeing on a set price for a specific period of time regardless of the market condition. Another type of lock-in deal involves a cap or ceiling on the price during the entire contract period. This contract may allow consumers to pay the lower price should the market price goes lower than the cap price during the year.

In these two arrangements, some dealers may ask customers to pay up front for their oil while the others may agree to a schedule of fixed payments. These arrangements are normally offered by oil dealers after they have obtained a heating oil contract for their customers on the wholesale market for a specific price.

This type of payment deal started about 10 years ago in some 24 U.S. states mostly in the Northeast section. Heating oil is commonly used in those areas. In 2002, these lock-in deals became more popular when oil prices experienced big fluctuations. According to experts, customers who opted to lock into these deals in the last eight years did not regret their decision as it benefited them more than if they had stuck with the prevailing rates.

On the other side of the coin, many local heating oil companies that have locked-in prices in the past are said to be having second thoughts on offering lock-ins this year. The reason behind the decision to halt such offer is the highly volatile status of the oil prices which remains very unpredictable. With Hurricane Ike still in the vicinity of the U.S. and presidential elections in the offing, oil companies are uncertain whether oil prices will go down or up in the near term. Experts also see the problem of customers not paying their bills as another challenge being faced by oil dealers.

Be sure to assess the situation first and consider the vital factors involved. Also, lock-in deals that offer guaranteed prices may require written contracts so before you sign anything, it’s best to consult your state attorney general or consumer protection agency and gather the right information.