Playing "Chicken" with oil ...

[Shortstuff]

The hard part - is knowing when to flinch.

Got a call from my oil company two weeks ago. He wanted to know if I was ready to lock-in on one of the 3 options they provide because my contract runs out at the end of October. For the past year we have been locked-in at a "Cap" of $3.22.9 per gallon.

Here were my choices:

1. Pay whatever the price of oil is on the day of delivery.

2. Pay one set price the whole year, it doesn't matter what the price is the day of delivery. He offered me $3.75.9 per gallon.

3. Lock-in at a Cap price (ceiling) of $4.03.9 per gallon. If the price of oil is lower on the day of delivery, I would pay the lower price, but I would never pay more than the Cap price.

Knowing that I had until the end of October to make a decision, I told him we would talk it over and let him know. By the way, they have already topped off our tank so it's full right now. Of course last week he called and left a message asking us if we were ready to lock-in yet and that the prices have dropped. I didn't call him back.

We've noticed that as unusual as it may seem, every day that the stock market has closed DOWN, that the price of oil per barrel has also dropped. So now it became a game of "chicken" - watching the market closely and trying to figure out when it's time we feel the price per barrel has reached it's lowest point - and it's time to lock-in. We called him two days ago and locked-in at a Cap (ceiling) price of $3.78.9 per gallon. Since then of course the price per barrel of oil has dropped a bit more, but we're locked-in.

We installed our new pellet stove and have been using it to heat one-half of our house (it's a long ranch-style floor plan) so we're only using oil for the other half, hot water is electric. Hopefully we should use about half the oil we did last year.

Has anyone else made a contract with their oil company?

Steve

 

[DiggerJim]

I'd pick option #3 unless there's a charge for setting up the lock-in. That way you get upside protection but don't lose the benefits of lower prices. Right now it's more than a $1 lower in CT than you're getting for your pricing.

 

[pkryan]

Yes and unfortunately our "lock in" price was 4.49 back in July with the same, if the price is cheaper on day of delivery they will give us that lower price. This made our "Budget" plan go up to $364 a month, we have half a tank left(fill was in July) with using it just for hot water. Hoping to top it off once more before it gets real cold and pray that our pellet stove will carry us through the winter. Im behind on the budget amount hoping that it all comes flush next July. But your right playing chicken you want to get your lowest price possible. Good Luck!!

 

[JustWood]

OPEC is meeting tomorrow. Today might be a good time to lock in. I don't have a crystal ball, just sayin'.

 

[DiggerJim]

OPEC is meeting tomorrow. Today might be a good time to lock in. I don't have a crystal ball, just sayin'.

They're expected to cut another 2 million barrels of production a day. It's also not expected to have much of an impact since demand has still been crashing lower. If they go with a bigger cut that might do something to prices in the short term but they've telegraphed their intentions long enough that there's been time for the impact to already have been reflected in the futures prices.

The bogey out there is the noise from Russia about a)joining OPEC or b)working with Iran & OPEC on controlling propane/natural gas production. That one isn't nearly as subject to the whims (or pain) of America's drivers (who account for 40% of world gasoline consumption). The folks converting their oil burners to gas might be in for some nasty price shocks.

 

[teamorange]

Yeah, this is always the tough decision to make around this time. Since oil has been dropping so much lately, I figured to wait it out. Last Monday I called Petro oil and asked their rates. I am in RI btw. They were as follows:

Lock in rate: $3.09
Ceiling plan: $3.41, you pay market plus .20 cents the day your oil is delivered, but it can't go over 3.41
Market price: you pay market price the day its delivered

That was last Monday. I called them again last Friday:

Lock in rate: $3.09 and this was after oil dropped by $6 bucks!!
Ceiling plan: $3.21 (BIG DROP)

So I figured if the highest I have to pay is going to be $3.21 then I am all for it, last year I locked in at $3.09 and feel I made out big time. I was going to call today just to see what the ceiling plan was out of curiousity...

So $3.21 (plus I am on their budget plan), and figured I am going to use at least half if not a 2/3 less oil then last year with the pellet stove. So that was my story...

As always, are you a gambler??

 

[Jester]

Most of the oil companies here have either done away with the prebuy or made them so unattractive that its not worth it. Two years ago I had the buy X dollars worth of oil at y price. If on the delivery day that days price was less than Y you got it for the days price. Last year it was you paid your Y price regardless of what the market did. The last time I looked into it there wasnt anyone in this neck of the woods letting you prebuy. they would however let you pre pay all year so you werent hit with the big winter months. ( I have bank account too, at least I can earn the intererst letting it sit for me)
If you are in Mass go to massenergy.com Its kinda like a Sams club for home heating oil. Ive been 10-20% below the average market for my heating oil since I joined.

 

[gw2kpro]

The hard part - is knowing when to flinch.

Got a call from my oil company two weeks ago. He wanted to know if I was ready to lock-in on one of the 3 options they provide because my contract runs out at the end of October. For the past year we have been locked-in at a "Cap" of $3.22.9 per gallon.

Here were my choices:

1. Pay whatever the price of oil is on the day of delivery.

2. Pay one set price the whole year, it doesn't matter what the price is the day of delivery. He offered me $3.75.9 per gallon.

3. Lock-in at a Cap price (ceiling) of $4.03.9 per gallon. If the price of oil is lower on the day of delivery, I would pay the lower price, but I would never pay more than the Cap price.

Knowing that I had until the end of October to make a decision, I told him we would talk it over and let him know. By the way, they have already topped off our tank so it's full right now. Of course last week he called and left a message asking us if we were ready to lock-in yet and that the prices have dropped. I didn't call him back.

We've noticed that as unusual as it may seem, every day that the stock market has closed DOWN, that the price of oil per barrel has also dropped. So now it became a game of "chicken" - watching the market closely and trying to figure out when it's time we feel the price per barrel has reached it's lowest point - and it's time to lock-in. We called him two days ago and locked-in at a Cap (ceiling) price of $3.78.9 per gallon. Since then of course the price per barrel of oil has dropped a bit more, but we're locked-in.

We installed our new pellet stove and have been using it to heat one-half of our house (it's a long ranch-style floor plan) so we're only using oil for the other half, hot water is electric. Hopefully we should use about half the oil we did last year.

Has anyone else made a contract with their oil company?

Steve

You have another option. When you need oil, you can look in the local paper, find the cheapest price, call them and have them send a truck. That's what I used to do. (Don't have to anymore) Usually that price is .25-.40 cheaper than what you get from the local big oil company.

For example, right now in my town, cash price at one of the big oil places is $3.09, $3.19 at another, $3.04 at another

Looking in the paper, the little guy in this area is advertising for $2.65, $2.60 if you order 200+ gallons.

 

[ssupercoolss]

The hard part - is knowing when to flinch - i thought it was "the hard part about playing chicken is knowing when to flinch"
if we are quoting from the movie red october. anyways, with me using pellets, and a wood boiler, i am playing the market, but 3.29 cap doesnt sound bad. codoil.com has oil in my area for 2.77/gal today.

 

[rockreid]

I'm not locking in at all this year. I think heating oil will continue downward as demand drops in response to the high prices and people turn down their thermostats. There is a huge oil OVERsupply problem right now around the world. Refineries are cutting back on production to keep from overflowing their containment. I locked in at $2.79 last year here in Stamford, and I now predict oil will fall below that price come January. I would not be surprised to see a short term (1 year or so) collapse of oil prices into the $30-$40 range as various despotic oil countries try to salvage as much profits as possible right now in order to keep their tin pot dictatorships afloat.

 

[hossthehermit]

Ordered 200 gallons today @ $2.99.9, for backup in case the Revolution dies. Been watching price for 2 months, broke thhe $3 mark, decided it was time, delivery in the morning.

 

[woodsman23]

Yes and unfortunately our "lock in" price was 4.49 back in July with the same, if the price is cheaper on day of delivery they will give us that lower price. This made our "Budget" plan go up to $364 a month, we have half a tank left(fill was in July) with using it just for hot water. Hoping to top it off once more before it gets real cold and pray that our pellet stove will carry us through the winter. Im behind on the budget amount hoping that it all comes flush next July. But your right playing chicken you want to get your lowest price possible. Good Luck!!

You pay 364 a month every month??.. WTF no way right, I still have propane from 2 years ago and it was 1.65 a gallon. My entire heating bill last year was 840.00 dollars. If you are in fact paying that much then all i can say is WOW

 

[imacman]

Back in August when my oil man (a friend, supposedly) suddenly sent one of their trucks over and delivered 365 gal of $4.19 oil. Then they had the nerve to sent me the lock-in letter 2 days later, AND ask for $360 for lock-in "insurance".......I'll give all of you one guess what I did with the letter.........

 

[pelletizer]

Although not priced the same in NH and ME if prices continue to drop we may see $2.60/gal ? but pellets burn hotter and still make the house toasty for less $$$ and fuel comes from North America.

Below are oil prices for North Boston High 3.59 Low 2.64 Average 2.924
Company Name Town Price Phone# Date Calc
METRO FUEL MEDFORD $2.790 10/22/2008
RANCO FUEL MEDFORD $3.590 10/22/2008
BOBS OIL COMPANY MELROSE $2.620 10/22/2008
CIAMPA & DAUGHTERS FUEL CO MELROSE $2.699 10/22/2008
FIREMANS FUEL MELROSE $2.570 10/23/2008
MELROSE OIL CO MELROSE $2.850 10/22/2008
NARDONE OIL MELROSE $2.690 10/22/2008
AUTOMATIC DISCOUNT FUEL STONEHAM $2.799 10/22/2008
STONEHAM FUEL INC STONEHAM $2.799 10/22/2008
C & C OIL CHELSEA $2.650 10/22/2008
COMMONWEALTH FUEL CORP CHELSEA $2.890 10/22/2008
HOWIE'S OIL CHELSEA $2.650 10/22/2008
HAYES OIL PRODUCTS CO CAMBRIDGE $2.990 10/22/2008
ARCTIC OIL CO MALDEN $2.990 10/22/2008
CANNATELLI FUEL CO MALDEN $2.899 10/22/2008
CHRISTIES OIL SVC MALDEN $3.090 10/22/2008
INTER-CITY OIL HEATING INC MALDEN $2.950 10/22/2008
ADILETTO FUEL CO EVERETT $2.899 10/22/2008
SUPINO BROTHERS OIL EVERETT $3.090 10/22/2008
POL-OIL INC REVERE $2.590 10/23/2008
FUEL 2000 REVERE $2.990 10/22/2008
MYERS BROS OIL CO REVERE $2.999 10/22/2008
NORTH SHORE FUEL REVERE $2.999 10/22/2008
AUGUST BROTHERS OIL CO WINTHROP $2.890 10/22/2008
BARBARY COAST FUEL CORP WINTHROP $2.950 10/22/2008
SIMIONE OIL CO WINTHROP $3.090 10/22/2008
SULLIVAN'S OIL CO WINTHROP $3.090 10/22/2008

 

[imacman]

Right now, based on what I paid for the pellets I have, heating oil would have to go below $2.25/gal before it would be cheaper for me to use oil......I don't see that happening ever again.....I'm burning pellets!!

 

[DiggerJim]

Although not priced the same in NH and ME if prices continue to drop we may see $2.60/gal ? but pellets burn hotter and still make the house toasty for less $$$ and fuel comes from North America.

Almost all of the home heating oil used in the U.S. comes from North America - Canada in fact.

 

[abbdog]

4.50$ in the summer . 3$ in the fall .Guess its gonna be 2$ soon.What a scam.

 

[globewyre]

I have read a couple of news article where people locked in at the high price and are now stuck paying for high oil prices. The bad thing is it is not just individuals, some towns, counties and schools are now stuck in a high priced oil contract.

 

[Jester]

http://newenglandoil.com/massachusetts/zone9.asp?x=0

This seems to be a pretty cool oil price tracking site.

Its funny, with all the posts discussing price/efficiency and principal, I can only think of one post off the top of my head where someone was going to forgo pellets and use oil when its cheaper.
I dont know if its resentment for the system/the man or just the love of the heat that the pelletstove gives over my steam but my oil guy would just about have to be putting it in my tank for free to get me to go back. And since he usually forgets to deliver to me, or thinks Im someone else who cancelled his automatic delivery, or just forgot I use oil for hot water in the summer.