Fuel Pricing Basics: Paying For Propane Or Heating Oil
Written on: September 14, 2020
When it comes to choosing how to buy your propane or heating oil, it pays to be informed about your options so you can choose the one that works best for you.
Three Fuel Pricing Options
Propane and heating oil suppliers (including us) typically offer three basic ways to pay for your heating oil: market price, fixed price (which is often a pre-buy), and price cap. Let’s take a look at the differences.
- Market Price – The market price for heating oil changes from day to day, with no limit up or down. If you choose to pay market price, you’ll benefit from falling prices without paying a fee – but you’ll also pay more for your fuel when the price rises. Market price is the least predictable of the three options listed here.
- Fixed Price – As the name suggests, a fixed price doesn’t change – you’ll pay the same price for your propane or heating oil throughout the heating season, no matter what happens in the market (“pre-buy” pricing is a type of fixed pricing in which all gallons for the season are purchased in advance at an agreed upon price). With fixed price/pre-buy, you’ll benefit if heating oil prices rise, but can’t take advantage if the heating oil market price drops.
- Price Cap – A price cap program limits how high your heating oil price can rise – but not how far it can fall. To put it another way, you’re protected against rising prices while still being able to take advantage of price drops. However, you will pay a fee for this service, which covers the cost of insurance to protect against falling prices when we purchase fuel from our suppliers for the season (the fee only covers the cost of the insurance; we don’t profit from collecting it).
Each of these options has its advantages and disadvantages – much of the decision about which plan is right for you depends on your preferences. If you like certainty, a fixed price might be best; if you prefer to make your decisions at the time you buy your fuel, market price might be a better option. If you don’t mind paying for a little peace of mind – and potentially saving a lot of money – a Price Cap will give you the best of both worlds.
Need help in choosing a heating oil or propane pricing plan that’s the right fit for your family? We’re happy to talk about it. Enrollment for Price Cap and pre-buy is open now – contact Downey Energy today to learn more about heating oil and propane pricing plans in Hudson Valley, NY!