Too Late To Sign A Contract?

If you are willing to take some time to weatherproof your home, wear lots of sweaters and make sure your furnace is tuned up then you can make some progress in lowering your heating bills. But even your best efforts will only take you so far. There are two things that we can't control:

1. How cold or warm the winter months will be
2. The market price of crude oil

If you heat with natural gas it's likely that your costs are partly controlled by the state you live in and larger global market forces. If this is the case then you need to do all you can to conserve heat and hope that Mother Nature (and Wall Street) are kind to us all this winter.

If you heat with fuel oil your dealer may offer you the chance to 'lock-in' a price or to buy a protection plan that will limit the upper price you will have to pay. These are usually called 'fixed' or 'capped' prices. A fixed contract doesn't go up or down while a capped program sets the highest price you will pay, but if retail prices go down, you pay the lower prices. Due to the volatility of the oil market, there are fewer providers now offering these programs.

If you are considering signing a fixed or capped contract there a two things you should know:

You are making a bet on the future price of oil and no one knows for sure what the future holds - it's a gamble. In 2008 prices for heating oil topped $4 a gallon and some consumers were willing to buy prepay contracts for up to $5 per gallon. That winter, the market crashed and mid winter prices were as low as $2 a gallon. If you had a fixed contract in 2008 then you suffered financially.

Your dealer is also guessing about what the price of oil will be 3-6 months out. In order to offer you a contract a dealer must reserve oil at a fixed price from their suppliers.

And the bottom line is...

Sure it's all a guess but if you haven't yet signed a contract for the 2010-2011 season you may want to hold off and ride the market. U.S. stockpiles of oil hit a 27-year high in late October. Depending on who you call, prices are currently running between $2.70 and $2.90 per gallon. In its latest forecast of oil prices, the U.S. Department of Energy predicted that prices will remain flat through the end of the year and many analysts tend to agree. The slow economy, combined with a temperate weather outlook and a plentiful supply line, give many people good reason to believe that prices will remain steady this year.

That said, just remember what Yogi Berra said: "It's tough to make predictions, especially about the future"