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Home Heating Oil Delivery – Buying Options
There are three options to buy heating oil. They all have their pros and cons and each of these have a large number of consumers who will defend it as the best option.
- Cash on Delivery (COD) oil. This is a classical way, where consumers order an amount of oil they need and get it delivered at a time agreed with the supplier.
PROS: You can specify any amount you need and choose any supplier that serves your area. COD oil price is usually the cheapest and you can get additional discounts. If you’re not satisfied with oil quality you can switch to another supplier without any losses, fees and penalties. You can get oil off-season at a very low price.
CONS: Cash needs to be readily available on the delivery day, though most suppliers now accept credit and debit cards. Price varies based on crude oil price, demand, seasonality, etc. but COD deliveries are usually the cheapest option.
- Contracts: The supplier takes all the responsibility for your oil, assuring that you will never run out of it, following a season-long contract which has a fixed price of oil. There are generally two pricing options:
Fixed price year-round – you are locked in to a certain price, no matter what the current market price is
Capped price – the price cap is the highest price and you will never be paying more than that, no matter where oil prices go.
PROS: Relieves you from the stress of worrying about running out of oil. You are guaranteed that you will always have enough oil heat in your home. No need for tank gauge, dipstick or any other measuring instruments. You will get oil whenever the supplier’s computer system determines that your fuel levels might be low. Various payment terms can be agreed upon, no need for readily available cash on delivery day. Some companies offer annual tune-up included in the contract, so you can try to calculate whether it’s more convenient for you to cover overall heating expenses that way.
CONS: Fixed price may be much higher than price of COD oil. Inaccurate measurements of your tank size, furnace state and inhabitants’ heating habits may still result in a suddenly empty tank, and damages from it are not covered. You can’t cancel the contract for free, there are penalty fees. You can sometimes get lower quality of oil but you can’t easily change the supplier. In the capped price option, the price cap us usually much greater than you would expect.
- Automatic Delivery – Suppliers have recently developed “hybrid” delivery solutions, which combine some of features of both COD and contract delivery, trying to get “the best of two worlds”. For example, you can have an agreement to get oil with a discount, though not that great as with real COD, but maintenance and sometimes repair may be included in it. On the other hand you will have to pay on delivery day, just like you do with COD. Other companies may offer automatic delivery at COD prices and allow you to pay later.
In conclusion, COD oil is typically the cheapest and most flexible option. Contracts lock you in with a single supplier for the whole year. Automatic delivery is a convenient option that’s similar to COD deliveries but you don’t have to worry about tracking your oil usage and running out of oil.
How COD oil prices are determined
Cash on Delivery (COD) is the simplest way to buy heating oil for your home. Basically, you are purchasing oil anytime you need it, and you have no obligations beyond paying for the amount you ordered. You can order any number of gallons you’d like. The only condition is that you have to pay for it at the time of delivery, but you can also save a lot of money. COD is the most effective option when it comes to price and freedom to choose the best/cheapest supplier that fits your needs.
COD oil price is determined on a daily basis. Since there are many suppliers in urban areas where oil heat is common, you can reap the benefits of competition between companies.
COD heating oil is either stored in the supplier’s own tanks or pulled directly from terminals. Since suppliers have no knowledge on how well this oil will sell over a short term (due to that competition), they need to follow the trends and offer competitive prices. The price is dictated by the wholesale price, which is the price per gallon they paid when buying the oil. Major determinant there is the crude oil price. If crude price is low, as is the case in 2015, heating oil will also be very affordable. If crude oil price goes up, heating oil price increases, too.
COD is the only option which allows you to order heating oil at the current price without locking yourself into a contract with a supplier. There are no locked-in prices – this means you can save a substantial amount of money.
You can also fill your tank during spring or summer, when the price is really low thanks to lower demand. You can basically get your heating fuel on clearance – something which is not possible with natural gas or electricity. Clearance sales may even happen during season, when some suppliers need to quickly get rid of remaining oil before a wholesale delivery. These discounts may not be as great as during summer, but still are welcome when you need oil.
Suppliers are effectively tracking oil heat prices among competitors in their area. If a supplier has their stock full, but sales are poor due to highly competitive pricing of other suppliers in nearby, they will be forced to lower their price slowly, but continuously, before they reach a price level at which oil sells well according to their criteria. Some suppliers may even offer loyalty discounts if you buy again from them. This may look similar to delivery contract, but there is still no obligation and price is usually much lower, even before these discounts are subtracted.
Sometimes events such as severe weather or labor strikes may break the supply chain causing immediate, yet short-lasting price boom. To avoid this, never leave your tank less that one quarter full. In such cases, the price usually recovers within days once the causing issue is resolved.