Downside protection is an option we offer at an additional cost which ensures that your price per gallon will decrease should oil prices fall after you have locked in. If you choose to purchase downside protection when you sign a contract, and our daily posted price is less than the rate you locked in at on the day of your delivery, we will charge your account the lower rate.
In July of 2008, oil prices reached a high of $4.799 per gallon, and continued to rise. Many customers feared paying over $5.00 a gallon, so they began to lock in at the $4.799 rate. As the winter approached and the cold weather settled in, prices began to fall. By December, our daily discounted rate dropped to $2.599 per gallon. Customers who locked in during the summer were now paying $2.20 more per gallon than the customers who decided not to lock in, and many customers that requested fixed price contracts wanted to break their contract and get out of the deal.
As our practice has always been, we only offer fixed price contracts to those who request to lock in. We do not encourage or discourage our customers to sign a contract; it is your decision. We offer all of the options in the marketplace to our customers and we let you decide whether or not to lock in. And in every contract we send, there is the downside protection option which is our insurance program that lessens the financial impact to those who fear locking in at the wrong price.
If you are serious about protecting yourself against falling oil prices after you lock in, you should consider downside protection.