The Star-Ledger

Ask The Biz Brain... About Heating Oil Company Contracts

The Star-Ledger — Saturday, May 31, 2008

BY TOM JOHNSON

Kathy:Every June, my heating oil company offers a contract to purchase my heating oil for the year. In June 2006, I purchased 800 gallons for the winter heating season and got burned because prices moved down during the winter. Because of that experience, I did not prepay my heating oil bill for the next winter heating season and have been incinerated as oil prices skyrocketed. How can I make a more educated decision about whether to prepay this year?

The Biz Brain: We asked Eric DeGesero, executive director of the Fuel Merchants Association of New Jersey, for his best guess on which way heating oil prices will go next winter.

His reply: "My crystal ball is as cloudy as the Biz Brain's regarding the future price of oil."

But DeGesero said consumers should remember price protection programs offered by oil dealers are not designed as a way to bet on prices for the upcoming season.

Instead, he said, the purpose is to provide predictability in pricing, so customers can be assured fuel heating costs will not exceed a fixed amount.

If you're still unsure, you might want to opt for a budget plan. That's where you begin making payments in the summer and are charged the going price when the delivery is made.

At the end of the season, the dealer and customer will reconcile the account, with either the customer paying the balance or the oil dealer refunding the difference or offering a credit for next season.

You also might want to explore the possibility of joining a cooperative. New Jersey Citizen Action operates the NJCA Oil Group, a cooperative where thousands of consumers join together to buy oil as a group, a strategy that provides savings of as much as 30 percent.

NJCA Oil Group negotiates a price cap, guaranteeing customers will not pay more than the cap during the season. And if the price of oil dips, they are not stuck paying the higher amount.

For more information on the cooperative, call the NJCA Oil Group at (800) 464-8465, ext. 200.

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