The yo-yo effect of local oil pricing
As published in The Keene Sentinel.
Winter is always unpredictable. But when it comes to heating costs, homeowners have a bigger-than-usual question mark over the coming season.
With fall oil prices high and finances tight, fewer oil buyers are choosing to pre-buy their home heating oil, according to some local oil dealers.
That means more people will have a careful eye on the price of oil over the coming months.
"They're gambling and watching," said Rodney Johnson, branch manager for Rymes Propane & Oil in Keene.
The price of heating oil -- like gasoline and other petroleum products -- is subject to the whims of investors and speculators.
"It fluctuates like a basketball bounced on a court," Tom Chabott, owner of Chabott Coal & Oil in Keene, said Tuesday. "It goes up and down -- we had a 3-cent increase last night. It can change as much as 12 cents on a day. ... It's the most volatile thing I've ever seen."
Homeowners who pre-buy oil pay in advance for a season's worth of fuel and then rest easy and warm knowing the bouncing ball won't further affect their finances.
But this year's pre-buy prices are above $3.50 a gallon, more than 80 cents per gallon higher than this time last year.
Both Chabott and Johnson think that fact is part of why their pre-buy sales are half what they were last year, as people worry about missing out if prices drop in the coming months.
But they also see other factors at work.
"A lot of people don't have the money to pre-buy so they're buying on a regular basis," Chabott said.
He is also seeing customers forgo automatic deliveries in favor of watching their tanks and calling when they need to be refilled.
"That creates a problem for us because people aren't watching their tanks close enough," he said. Emergency deliveries that require a truck to go off-route come with a $150 surcharge.
One company that hasn't see a significant drop in pre-buy sales this year is Discount Oil of Keene, according to owner Lou Berube.
But he does report a noticeable increase in the number of customers purchasing "downside protection" -- an insurance program that allows customers to reap the savings if prices go down but guarantees that they won't pay more if the price goes up.
The program was not popular in previous years, Berube said. Chabott stopped offering it after it generated little interest.
But this year is different.
"It makes it more attractive to enter into a pre-buy agreement if you know you're protected if the price goes down," Berube said.
The cost of buying the insurance from his company is 30 cents a gallon for every gallon purchased over the season. So a household that burns 1,000 gallons a winter would have to pay $300 for the insurance.
But if the price were to drop by $1, Berube points out, that family could save $1,000.
As for where prices will stand in the coming months, oil dealers say they have no more insight than their customers.
"If I did I'd be sitting on an island somewhere drinking an umbrella drink," Johnson said. "I wouldn't be up here."
tagged with: economy, home heating costs, oil pre-buys, personal finances
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