My Oil Company is Starting to Offer Lockins for Next Season Now

[teddy1971]

I was cleaning up my office and noticed an oil bill from the 07/08 season. I called my oil company to find out when they would be offering lock-in's for the following season. They stated that they usually don't offer lockins until July 1st. But this year they started offering lockins now and the cap price for next season would be $2.69 per gallon. They are currently selling oil for 1.99 per gallon. For those that are not familiar with locking in that means that I would pay whatever the current market price is for oil with a cap of 2.69 per gallon. This is very tempting to me especially since I normally use @ 800 gallons of oil. Though that was keeping the house pretty cold (58-68). I estimate that I would need to use about 1000 gallons to keep the house as warm as pellets did this past season (72-76). This would cause me to spend at most $2700 for oil or $1400 for pellets (5 tons @ 280 per ton) and @ 673 for oil (250 gallons for heating basement and hot water). There is still a savings of about $600 using pellets over strictly oil. So I'll probably be using pellets next season. But one has to think that there must be some reason why the oil companies want people to lockin sooner than later. In the 6 years I've lived in my home they have always been very strict in stating that you cannot lockin before July 1st. Maybe they think oil prices will be going down more. Especially since the IEA (International Energy Agency) forecast today that oil consumption will be down considerably for the rest of the year (http://money.cnn.com/2009/04/10/markets/iea_forecast.reut/index.htm?postversion=2009041005). I paid @ 250 per ton last year for my pellets and will probably pay 270-280 per ton this year. But Pellet dealers should be careful because if it isn't about sawdust limits or frieght cost thats pushing the price of pellets up then they may be stuck next year with alot of product and little customers. Especially since most oil companies offer a budget plan and pellets have to be purchased in bulk to get a real discount. In this economy people may not have the cash up front to buy pellets in bulk this year.

 

[treehackers]

At least you have that option. I called 4 oil companies in South Central MA - none of them would do a lock-in this year

 

[dac122]

I would guess with all the turmoil in the crude markets and folks burned by lock-ins this last year, they are taking a wait-and-see approach before considering a lock-in program.

 

[mandkj]

If I pay $300 a ton and use strictly pellets, I'm saving around $700 a season and have a warmer house. And thats if oil stays at the current price I'm paying. I've seen a lot of comments about not paying more than the low $200s but in this economy, $700 isn't chump change, at least to me, and well worth my effort. I'm sure to those in other parts of the country that $300 is a lot but here, its average. I know how much oil I use to keep the house 65 for the season and I know how much it costs to keep it 72 with pellets. Oil would have to be $1.58 a gallon to be even with pellets.

 

[teddy1971]

If I pay $300 a ton and use strictly pellets, I'm saving around $700 a season and have a warmer house. And thats if oil stays at the current price I'm paying. I've seen a lot of comments about not paying more than the low $200s but in this economy, $700 isn't chump change, at least to me, and well worth my effort. I'm sure to those in other parts of the country that $300 is a lot but here, its average. I know how much oil I use to keep the house 65 for the season and I know how much it costs to keep it 72 with pellets. Oil would have to be $1.58 a gallon to be even with pellets.

What did you pay for pellets last season? And did you save more than $700?

 

[slls]

Local oil dealer prebuy $2.49 a gallon, must have lot left over from last winter LOL.

 

[Deed]

In Maine was able to lock in for $219.00 a gallon for oil, at this price I break out even, as my hot water is heated with oil. I may even save some money. Besides the bonus of having a lot less dust in the house. Will still use the pellet stove at times, as I like the heat. My wife will appreciate the lack of dust. As pellet prices are getting a bit too high and oil is way down.

 

[mandkj]

If I pay $300 a ton and use strictly pellets, I'm saving around $700 a season and have a warmer house. And thats if oil stays at the current price I'm paying. I've seen a lot of comments about not paying more than the low $200s but in this economy, $700 isn't chump change, at least to me, and well worth my effort. I'm sure to those in other parts of the country that $300 is a lot but here, its average. I know how much oil I use to keep the house 65 for the season and I know how much it costs to keep it 72 with pellets. Oil would have to be $1.58 a gallon to be even with pellets.

rned
What did you pay for pellets last season? And did you save more than $700?

I paid $270 last year but I didn't have enough to last me the whole season so I burned oil at the end but still saved a little. This last season was the first I burned 24/7 and didn't know how much I would use.

 

[Wet1]

If I pay $300 a ton and use strictly pellets, I'm saving around $700 a season and have a warmer house. And thats if oil stays at the current price I'm paying. I've seen a lot of comments about not paying more than the low $200s but in this economy, $700 isn't chump change, at least to me, and well worth my effort. I'm sure to those in other parts of the country that $300 is a lot but here, its average. I know how much oil I use to keep the house 65 for the season and I know how much it costs to keep it 72 with pellets. Oil would have to be $1.58 a gallon to be even with pellets.

1 ton of pellets contains about 16.5 million btu, 119 gallons of oil contains the same 16.5 million btu. If pellets cost $300 a ton, you are suggesting the break even for oil is $1.58 per gallon? That 119 gallons of oil at $1.58 only costs $188... Even assuming your oil heater is a little less efficient, and/or has greater system losses, I fail to see how you came up with $1.58 being the break even for $300/ton pellets. Add in all the work associated with pellets, and I would think sub $2 oil would be a significant money saver over $300 pellets...

 

[webbie]

In general, just move the decimal point....

$300 pellets = $3.00 oil.

Yes, that figures a little slop for you hauling the pellets, and cleaning the stove, maintaining and original cost etc.

But most other savings is from space heat instead of central heat. In other words, if the freestanding stove was oil, gas or lp burning the savings % in terms of the space heat part would be the same.

 

[kinsmanstoves]

Why not stock oil? Drums are cheap and all you need is a dolly and a hand pump. If I had fuel oil I would be doing that right now. We have LP at the house but only use it if we go away for the weekend.

Eric

 

[mandkj]

If I pay $300 a ton and use strictly pellets, I'm saving around $700 a season and have a warmer house. And thats if oil stays at the current price I'm paying. I've seen a lot of comments about not paying more than the low $200s but in this economy, $700 isn't chump change, at least to me, and well worth my effort. I'm sure to those in other parts of the country that $300 is a lot but here, its average. I know how much oil I use to keep the house 65 for the season and I know how much it costs to keep it 72 with pellets. Oil would have to be $1.58 a gallon to be even with pellets.

1 ton of pellets contains about 16.5 million btu, 119 gallons of oil contains the same 16.5 million btu. If pellets cost $300 a ton, you are suggesting the break even for oil is $1.58 per gallon? That 119 gallons of oil at $1.58 only costs $188... Even assuming your oil heater is a little less efficient, and/or has greater system losses, I fail to see how you came up with $1.58 being the break even for $300/ton pellets. Add in all the work associated with pellets, and I would think sub $2 oil would be a significant money saver over $300 pellets...

I don't think in terms of BTUs. For me, my wallet is the best indicator. Using strictly pellets, I average 16 gallons of oil a month to heat hot water. For a 7 month heating season thats 112 gallons. At my current oil rate of $2.40 that = $268.80. I use 3 tons of pellets for that same period so at $300 a ton, plus delivery is $1000. Thats a total of $1,268.80. Now, if I burned strictly oil, I would use 800 gallons. 800 X $2.40 =$1,920. Thats a difference of $651.20. In order for me to heat with oil for the same price, it would have to be around $1.58 a gallon. 800 X 1.58 = $1264.

If oil goes down, I lose but given the current international climate, I'm betting that doesn't happen.

 

[rex66]

It's hard to define the cost of wood pellets vs oil/propane with just the science and math of BTU's. There are many variables to consider. I have an very old not so well insulated home. I put in a Harman P61A in 2005. Previously I was heating with propane and from 2001 - 2005 I averaged spending between $1900 - $2200 and that was obviously before the spike in prices. I have been able to heat my house with 6 tons of pellets a season so my savings have been huge. I have never paid more than $249 per ton so even with delivery thats not even $1600. I have no doubt that I would have paid $3000 at least per season had I stuck with propane. With the forced hot air propane or oil systems they heat to a certain temp, shut off and the house immediately starts getting cold and the furnace soon starts up again. Not very efficient for me and not very warm. With the pellet stove it is a constant heat and keeps my house warm all day and night at a cost so cheap to me that the stove has paid for itself in less than 3 seasons. I realize folks with newer better insulated homes that live in warmer areas of the nation will make out better some years using oil or propane but for me it'll probably never be the case. It all depends upon individual circumstance.

 

[mandkj]

I agree 100%. I grew up in Central NY so I know what the winters are like there. We heated with wood and back then, wood stoves were nothing more than a metal box. Not very efficient. In addition to how well your house is insulated, the efficiency of your furnace has to be taken into account. I have mine serviced every year but I can't say its efficient enough to output the maximum BTUs. There are other factors for me as well. I'm using a renewable resource thats better for the environment, I'm not being affected by the politics of a foreign land other than the fuel it takes to deliver it, I'm supporting an industry that creates jobs in this country (not to mention I have a relative that makes pellets for NEWP) and I love the look of it burning.

I think the greed of the oil industry is far to strong for them to ignore. They've had a taste of what kind of money they can really make. Americans typically have a short memory and once the anger of last years prices fade, we'll start getting complacent and they'll start finding all of those bogus reasons to raise prices again. You can't fight human nature. There will always be someone ready to make money off the suffering of others. We saw that last year when the oil companies were reaping record, obscene profits while ordinary Americans were trying to decide on gas for their car or medicine.

 

[minnow]

I agree that there is no standard formula that can be applied uniformly. Everyone's own particular home and circumstances are different. From insulation to age , type and cost of the central heating system. Propane, natural gas, electricity and fuel oil seem to vary wildly from locale to locale. So what works for Joe in Ct. is far more costly for Carl in Indiana. As a pellet burner myself for the last five years, I have more than paid for the initial cost of my Harman insert during the time. However, I've never paid more that $225/ton. With that savings comes a cost however in time getting the pellets, humping them into the garage, stacking them , cleaning the stove, cleaning the chimney, etc. Also our home is a two story cape-cod style and with the insert in the living room, the upstairs and the far end of the first floor bedrooms are not all that warm (high 50-s to mid-60's) in the winter. However having said all that, up until this spring, it's been worth it. Now with pellets at $300/ton and the statements from the local dealer that this is the lowest there are going to be for the 2009-10 heating season, it's time to power down the pellet stove and return to fuel oil.
Currently oil here is $2.30 and unless oil shoots back up to $4.00 a gallon then that's the way we are going for the upcoming heating season. Even if the total cost for returning to oil is $200 or so more than the $300/ton pellet prices, my time and the ability to heat the entire house to a comfortable level is well worth this small extra expense. We heat the house at least 7 months out of the year (Oct-Apr). That breaks out to an additional $28.00 a month using the $200 extra cost of oil over pellets.
It will be interesting to see what the pre-buy for oil is this summer and how many consumers partake of this as most got burned big time last year, locking in at or near $5.00 a gallon around here and then finding out that oil dropped to less that $3 bucks for cash delivery. Local oil companies refused to sell at the cash price arguing that when the consumers locked in at $5, the oil company then went out and prebought at the then current price. I'm not sure I buy into that but whatever.
The bottom line is that I at this point see no reason to prebuy pellets at this price point. If oil and natural gas stays low (and a recent article stated that natural gas will fall like a rock this year), then pellets are going to have to come back down.

 

[mandkj]

I am extremely fortunate that my stove heats most of the house without overheating any one room. If that was not the case, I think I'd be looking at things differently. We had an issue where my teenagers refused to keep their bedroom door open and it would get really cold and then they complained. We tried a few different solutions but I refused to put a space heater in there because, as teenage girls go, the room is always a mess. I hit on a solution from eheat.com which is safe and only uses 400 watts to run and now they are warm as can be.

 

[webbie]

I don't think in terms of BTUs. For me, my wallet is the best indicator.
If oil goes down, I lose but given the current international climate, I'm betting that doesn't happen.

Well, if I did that, my mind would change every time I went to the ATM.
The only real comparison for a new buyers would be BTU to BTU, with efficiency taken into account.

BTW, I read today that Nat Gas is down below $4 per million BTU at wholesale. That would be the equiv of pellets at about $65 a ton. Very hard to compete at those levels.

Oil has to sometimes compete with Nat Gas, and those NG prices are already being locked into contracts for next heating season. So while I may agree that oil will not go down much (due to demand for motor fuel, etc.), I really doubt we will see anything like a repeat of last year.........heck, it could be decades before we see a swing like that again (It was last seen in 1980, then again in 2008, a space of 28 years).

Back to the thread title - if I were an oil user and I had a chance to lock in at $2. or less for part or all of my oil for 09/2010, I would probably do so. On the other hand, I'd have to think about those caps deals, etc..

And, of course, as Kins says...fill the old tank. Maybe buy a second oil tank if yours is in the basement...they are relatively cheap.

 

[teddy1971]

I don't think in terms of BTUs. For me, my wallet is the best indicator.
If oil goes down, I lose but given the current international climate, I'm betting that doesn't happen.

Well, if I did that, my mind would change every time I went to the ATM.
The only real comparison for a new buyers would be BTU to BTU, with efficiency taken into account.

BTW, I read today that Nat Gas is down below $4 per million BTU at wholesale. That would be the equiv of pellets at about $65 a ton. Very hard to compete at those levels.

Oil has to sometimes compete with Nat Gas, and those NG prices are already being locked into contracts for next heating season. So while I may agree that oil will not go down much (due to demand for motor fuel, etc.), I really doubt we will see anything like a repeat of last year.........heck, it could be decades before we see a swing like that again (It was last seen in 1980, then again in 2008, a space of 28 years).

Back to the thread title - if I were an oil user and I had a chance to lock in at $2. or less for part or all of my oil for 09/2010, I would probably do so. On the other hand, I'd have to think about those caps deals, etc..

And, of course, as Kins says...fill the old tank. Maybe buy a second oil tank if yours is in the basement...they are relatively cheap.

I've been think about it the past couple of days since I spoke with my oil company. Even though I have a local pellet dealer that can get me Lignetics for 270/ton delivered I am leaning towards waiting until june or july to see what the lockin price for oil will be. If I can lockin for 2.20 or less per gallon for the season. I will go with oil and hold off on the pellets. The comparison for me would be as follows:

Pellets and Oil Usage for 09/10 Season w/ Oil at 2.20 per Gallon
5 Tons ($1350) + 300 Gallons for basement and Hotwater ($660) = $2010 for the Season

Oil Usage for 09/10 Season w/ Oil at 2.20 per Gallon
1000 Gallons for the Whole house (I normally use 750 Gallons of oil keeping the house at 58-68. I've added an additional 250 Gallons to keep the house at 68-74.) = $2200

For an additional $190 I won't have to deal with lugging pellets around. I still have 30 bags left from last season and should have at least 15 bags left when I shut the stove down for the season. So I can burn a few bags next season on the really cold days. It's sad that the pellet manufactures/dealers do not have the foresight to think that they can still make a profit selling at bulk (keeping the demand for pellets high). I really like my pellet stove but times are tough and I need to think about the economics of it all. If pellet man/dealers are not gouging and are really stuck because of freight and material shortage then I really feel sorry for them. But It's probably the same thing the oil dealers felt when the bottom fell out for the price of oil.

 

[teddy1971]

There is alot of downward price pressure for oil for the remainder of this year based on the following link.

http://www.cnbc.com/id/30216997

 

[Wet1]

I have to agree, I don't think we are going to see high oil prices again through the next heating season. In fact, the spike we saw last year just just that... a spike. Spikes have been few and far between (the last real spike was during the late 70's?) and I don't expect to see another for a very long time, maybe another 20 years? Sure prices will creep up with time / inflation, but I'd be truly shocked to see $5 oil within the next couple of years.

 

[teddy1971]

I have to agree, I don't think we are going to see high oil prices again through the next heating season. In fact, the spike we saw last year just just that... a spike. Spikes have been few and far between (the last real spike was during the late 70's?) and I don't expect to see another for a very long time, maybe another 20 years? Sure prices will creep up with time / inflation, but I'd be truly shocked to see $5 oil within the next couple of years.

The pellet dealers I've spoken to are pretty annoyed that the manufactures are not budging with their prices. They stated that they are concerened that people may burn oil instead of pellets next season and they will be stuck holding the bag. One dealer has 5 Trailers of pellets now and he's sitting on them but he can't afford to go lower than $295 per ton delivered because he can't take such a loss. Like a stated earlier if these manufactures are not pricing pellets based on raw material supply or frieght cost they will be screwing themselves and the dealers in the long run.

 

[Wet1]

I wont shed a tear for the manufacturers if they put themselves out of business because they cant offer the dealers a decent product at a reasonable cost. I guess the flip side to this is nobody made the dealers order the over priced pellets in such large volumes...