Many factors come into play when calculating (or estimating) the cost of a gallon of #2 Home Heating Oil. And cost of oil alone may not be the single deciding factor when choosing a home heating oil dealer.
Many Maine heating oil dealers offer different types of programs which include oil delivery, annual burner cleanings and tune-ups, service plans to cover parts and service to repair your furnace, oil tank replacement and other service to other heating equipment in your home, while other dealers simply sell and deliver home heating oil.
Please view and print our Heating Oil Dealer Comparison Worksheet, it will help you organize shopping information and help you select the home heating oil dealer and plan best for you.
The following information will help you ask the right questions to get the answers you need to decide if purchasing heating oil as needed or signing up with a full service oil dealer is best for your situation and needs.
Here in New England, prices usually rise and fall with the weather -- literally. In the winter, when the demand for fuel to heat our homes increases so does the cost of a gallon of fuel oil. Also in the peak of summer when gasoline and other petroleum based fuels are in demand for travel, (and to some extent when energy for air conditioning is also in demand), prices traditionally rise. Shopping for home heating oil at the end of summer or early in the fall will give you a reasonable idea of how much it will cost to heat your home for the upcoming winter.
While some people prefer to, or need to pay as they go, others prefer to be on an automatic delivery program.
Home-owners may prefer one type of plan, renters may prefer (or be required) to use another. If you have bad credit or haven't established credit, some oil dealers may not offer you their best prices, terms or plans.
Cash - Most oil dealers will quote you a cash price. This is the cost per gallon for heating oil, when you are not on a plan, and when you want to place an order for a certain amount of oil. "Cash" usually refers to payment either in cash, or by check or money order, and usually requires you pay for the oil when delivered or within a very short amount of time, (usually no more than 10 days). Cash customer risk paying daily market prices which fluctuate, and can be higher when demand is high or supplies are low. Cash customers may want to call several oil dealers and compare prices and minimum order requirements, (most companies require you order 100 gallons at a time).
Automatic Delivery - Most home-owners sign up with a dealer for a plan which includes automatic delivery. Using historical data of how much heating oil your home has used in the past, and computer software which calculates energy needs based on "degree days", the dealer is able to fairly accurately gauge when you need oil delivered. Automatic delivery plans may include burner service, annual cleanings and have clauses in the contract regarding the price you'll be charged for oil.
Will Call - even if you have established a relationship with an oil dealer, and have a service plan in place, if you and your oil dealer have not established a pricing and payment plan, you may opt to call for oil when you need it. This type of arrangement leaves it up to you to monitor how much oil you have on hand, and decide when to purchase more oil.
Several terms are used by home heating oil dealers to describe how much you will be charged for oil, when you will make payments. The following section describes each of the terms and plans, and the benefits of each.
Locked Price - typically dealers offer to lock you in to a fixed price for the entire heating season. In Maine, many oil dealers offer this type of plan for pre-set amounts of oil, purchased in bulk, and delivered in smaller amounts. This allows the dealer to purchase enough oil at wholesale to supply you with the amount you predict you need, at todays price. If prices rise, (which they typically do during the winter), you will only be charged the price per gallon that you locked at -- if prices drop, you will pay a higher price. (Some dealers offer a way to reduce the risk of oil prices falling after you've purchased at a locked price -- this is called "Downside Protection", see below).
Downside Protection - this is a form of insurance you usually pay a fee for, (dealers each establish their own price for this protection -- it can be a lump sum, e.g. - $100 for the year, or may be based on a per gallon figure, e.g. $0.10 per gallon, which is added to the locked price). With downside protection, you are usually on a locked price, but will pay less if the price of oil comes down. Regardless of whether or not oil prices change, you lose the money you paid for this protection -- although, you could end up paying a lot more without it.
Capped Price - similar to a locked price, a capped price means that you will pay no more than the price per gallon you've contracted for. If oil prices come down, you will pay less, but if they rise, you will not pay more.
Budget Plans - if you are established customer, or have good credit, your oil dealer may offer to spread the payments for you home heating oil throughout the year. Normally budget plans are only given to customers who purchase 100% of their oil from the dealer, and who have contracted for automatic delivery. A Budget Plan prevents you from having to pay high oil bills in the middle of winter. Typical Maine homes use more than 60% of the total annual heating oil during the 3-4 coldest winter months. Most dealers will spread the payments for 10, 11 or 12 months, making the cost of winter energy much more affordable.