Every summer, we sign a limited number of contracts with our suppliers to purchase heating oil for the upcoming winter. We then add a markup that covers our overhead and notify our customers that fixed price programs are available. As our customers sign the contracts, we are careful to keep track of the number of gallons that we have sold as it is essential that we match our purchases with our sales of fixed price gallons. As more customers sign up, we purchase more fuel for next winter.
Most likely, the price we are paying has changed since our initial offering. We then adjust the prices of our programs accordingly. If we buy too much and the market falls, or if we oversell and the market goes up, we are at risk of incurring enormous financial losses. That is why we hedge our program by buying what we sell and selling what we buy. We offer downside protection – an insurance program that lessens the financial impact to those who fear locking in at the wrong price. A cap program is one that adds downside protection to a fixed price purchase. It is important to remember that no program guarantees the customer the lowest price in New England every day of the winter.
While fixed price contracts have become more popular over the last fifteen years, they have not always been the best decision for the consumer. Many Massachusetts homeowners have complained to the Better Business Bureau and Attorney General’s Office after signing a contract and oil prices fell, only to find that the contracts hold up and defaulting on one will have an adverse impact on your credit rating.
Our position is simple: we never encourage or discourage any customer from locking in. We offer all of the options available in the marketplace to our customers and let the customer make their own decision on whether or not to lock in. If you ever have any questions on fixed price contracts or any other program we offer, do not hesitate to give us a call.