Fewer Vermont Heating Oil Dealers Offering Price Protection Plans as Consumer Interest Wanes

Posted by Josh Garrett on September 29, 2010 at 3:13 pm

A tough economy and memories of the wild oil price spike of 2008 are making heating oil users and dealers in Vermont wary of pre-buy and price-lock contracts for this heating season. (image: michaelemilio.com)

Following trends already observed in Massachusetts and Connecticut this year, fewer heating oil dealers in Vermont are offering price protection to customers in the form of price-lock, price-cap, and pre-buy programs. The Rutland Herald reported Sunday on the results of a statewide survey of heating oil dealers, which found that just 56 percent of dealers are currently offering a pre-buy program, compared to 64 percent last year. The main cause for the decline, according to a state official and industry representative Matt Cota, is that a down economy has made paying up-front for an entire season’s worth of heating oil too expensive for many consumers. As a result, interest in pre-buy contracts has fallen off, leading many dealers to stop offering them.

In Vermont and elsewhere around the Northeast, price-lock and price-cap contracts are becoming less common as well. After the oil price spike and subsequent collapse in 2008 that amounted to a worst-case scenario for dealers and consumers tied to price-protection programs, both parties have shied away from the agreements. That year, with pre-season prices reaching all-time highs, dealers and consumers rushed to lock in prices for fear of an upward spiral, only to see prices crash as the heating season began, leaving them to pay a dollar or more per gallon over the market price for much of the winter. While that historic price spike and decline will not likely be repeated this year or at any time in the near future, the threat of losing so big on the gamble of price protections is too big for many consumers to risk it.

This month, the average heating oil price in Vermont is $2.70 per gallon, about 12 percent higher than this time last year. Over the course of the heating season, the Department of Energy’s Energy Information Administration predicts that prices will rise, but do so slowly and spare heating oil users and dealers huge ups and downs.