Preparing For Winter? 3 Things You Should Consider Before Pre-Buying Heating Oil

Posted on: 19 May 2016

Heating oil used to get more and more expensive each winter. After 2008, however, oil prices dropped, causing the cost for heating oil to drop as well. Since then, prices have fluctuated, making it difficult to determine what the cost per gallon is going to be next season. Not only do fluctuating prices make it difficult to budget, they make it harder to make the decision to pre-buy heating oil.

Historically, many people decided to pre-buy oil in the off season so they could avoid higher costs later in the year. However, sometimes the cost for heating oil drops, meaning that some pre-buyers may actually pay more simply by making the decision to purchase their oil early. If you're considering pre-buying your oil this season, consider these things. 

Industry Trends

Pay attention to current trends in oil prices. Are they currently rising? Are they expected to keep rising? If so, you can save money by purchasing your heating oil now rather than later. In fact, you can save quite a bit. For example, if you purchase heating oil now for $3.00 per gallon, and the prices skyrocket to $5.00 per gallon during the heating season, you can save $2.00 per gallon. If you use 2,000 gallons during the winter months, that's a savings of $4,000. 

Downside Protection

Some heating oil companies charge a fee, so many cents per gallon or a flat fee, for downside protection. It's kind of like an insurance policy against raising prices. The downside protection fee you pay when you pre-buy oil guarantees that you won't pay more money if prices go up. If prices are expected to stay the same or only increase slightly, though, paying a protection fee could end up costing you more money than if you had waited to purchase your heating oil. 

Price Decreases

What will your heating oil company do if the cost for heating oil plummets? Some, not all, offer protection. For example, if the price drops below what you originally paid, you will receive a refund for any amount that you overpaid. This means that you will never pay more than the current price for any heating season. As you can imagine, this policy can have a huge impact on your decision to pre-buy. 

There are several things you should consider before deciding to pre-buy your heating oil. Since there are fees, such as those charged for downside protection, for pre-buying, you want to make sure you're actually going to save money in the long run. The only way you can do that is by watching oil pricing trends. 

For heating oil, contact a company such as Olympic Energy LLC