Heating Oil Pricing & Payment Plans
Pricing Plan: What you pay per gallon vs. Payment Plan: When you pay your bill
One reason homeowners opt to use more expensive “full service” home heating oil companies is that these companies offer a wide variety of Pricing Plans (that affect the price per gallon that you pay for oil) and Payment Plans (that affect when you pay for the oil).
Pricing Plans: How your price per gallon is calculated for each delivery
- Market Price (Variable Price): Each delivery, you pay the oil company’s daily advertised price per gallon on the day of delivery.
- Price Cap (Price Ceiling): A contract in which the homeowner pays a fixed fee to be protected, for a one-year period, from an extreme spike in the market price of heating oil. Price caps are offered in two flavors: (a) you pay a fixed up-front fee (e.g. $250) to price-protect a fixed number of gallons (e.g. 1,200 gallons); or, (b) the oil company charges you a higher price per gallon than it’s daily advertised price, with the promise that this higher price maxes out at a certain point (regardless of how high the company’s daily advertised price gets).
- Fixed Price: The day you sign a 1-year delivery contract, the oil company forecasts your oil consumption for the upcoming 12 months, and pre-purchases these gallons to lock in your price. If the market price of heating oil falls, you are obligated to pay the higher, fixed price. If you use more than the forecast, you pay market price for excess gallons.
Payment Plans: When your bill becomes due for each delivery
- Pre-pay: You pay for oil you order before each delivery. If your tank doesn’t accept all of the gallons you ordered, you are refunded the difference.
- Post-pay: You are sent an invoice after each delivery and have 30 days to make payment. Heating oil companies that offer post-pay tend to be more expensive because these companies need to factor in the cost of homeowners who default on payments.
- Annual Prepay: The oil company estimates your total upcoming year of oil consumption, and you pay for the entire upcoming year of oil upon signing of the contract. If you use more oil than forecast, you are automatically switched to a pay-per-delivery basis.
- Budget Plan (12-Month Plan): The oil company estimates your total upcoming year oil cost based on your prior year usage and divides that amount by 12, billing you an equal amount each month of the year. Any difference between forecasted and actual annual cost is settled on your final month invoice.