Understanding Industrial Concerns

Heating oil is a low viscosity refined petroleum product that is used as fuel for boilers or furnaces in many homes across U.S. The popularity of heating oil is pegged on the fact that it is relatively cheap and environmental friendly. However, the price of heating oil, just like other petroleum products, keeps on fluctuating throughout the year. To cushion customers from these uncertain prices determined by the global prices of fuel, most heating oil suppliers offer customers price protection plans. Below is a brief overview of each plan and how it works.

Pre-payment plan

In a pre-payment plan, the supplier requires you to buy a certain minimum amount of oil in advance at a fixed piece. Considering that most people buy heating oil during winter, the demand is usually high. This drives up the prices and the supply is also limited. A pre-payment program aims at cushioning customers against all these uncertainties by offering a gallon of heating oil at the pre-season price, which is lower. You must order certain number of gallons as guided by the minimum set by the supplier and pre-pay the total amount in one lump-sum. This plan locks the price of the heating oil for that entire season. A pre-payment plan is suitable for people who use a large amount of oil during the heating season because the number of minimum gallons set by the suppliers is quite high.

Fixed price plan

For a fixed price plan, the heating oil supplier will sign a contract with a group of customers. The agreement stipulates that the dealer will buy a large amount of heating oil and charge the customers a fixed price during a specified period of time. The supplier arrives at this price after calculating their overhead and adding their profit margin. The beauty of this plan is that the price will remain constant during the agreed period of time despite the fluctuations in the world oil prices. This plan works well if a group of homeowners within the same locality are willing to order a large amount of heating oil at the same time. The supplier finds it convenient to order in bulk and distribute the heating oil according to the demands of each individual homeowner. 

 Cap plans

A cap plan aims at reassuring customers that the price of a gallon of heating oil will not exceed a certain amount during a stipulated period of time. The supplier will usually pick the minimum price that a gallon of oil can cost and then ask you to sign a contract agreeing to pay that amount during the stipulated period. This means that you will pay the amount agreed in the contract regardless of the price fluctuations.  You should consider signing a cap plan during winter when the prices of heating oil are high due to demand.

Heating oil price protection plans aim at cushioning customers from the regular fluctuations in the global market. You can use the guideline provided above to determine what works best for you when buying oil from a supplier like Fox Fuel Co.