Got an oil delivery from my local company Lorden Oil yesterday it was for $2.39 a gal.
Back in August when prices were sky high the offered their annual pre-pay. This year it was $4.64 with a .20 cent a gallon price protection option. I figured that rather than tying up so much money, I’d be better off taking my chances and paying as I go since the price was so high I figured how much higher could it go, plus if it dropped I’d be earning the interest instead of them.
I managed to guess right this year but quite a few people haven’t:
First of all, viewers and readers should know that many customers chose to lock in when prices were higher.
They wanted to protect themselves against prices going up even more, and now they’re stuck with higher bills.
In many cases those customers must honor their contracts, even though it looks like a bad deal
However it is forgotten that your local oil company likely prepaid too:
Harry Hicks, the owner of HL Fuels, said that’s precisely what he did. He understands his customers are in a bind, but, he said, so is he. “For people who are paying $4.60, I already paid over $4 for that fuel when they prepaid,” he said.
In Boston its not just the individual customers that lot their bet this year:
The consortium in the western suburbs, which comprises Brookline, Cambridge, Arlington, Belmont, Lexington, Newton, Waltham, Watertown, Weston, and Winchester, has used the system for more than two decades and says it works: It has tied or beaten the market every year until now.
Last year, those communities locked in a rate less than $2, and watched gleefully as prices rose to more than $4 a gallon. But this year, the sharp decline in prices means a city like Newton, which estimated it would use 905,000 gallons of oil this heating season, may have to spend an extra $1.7 million, based on the current average price.
The real danger is if people decide to start running to the lawyers when nothing crooked is going on. Most years the pre-buy is a good deal, this is the first year I didn’t use it myself and the margins on this stuff isn’t a lot.
When you have the freedom to make choices, sometimes you will make the wrong one.