Heating Oil Dealers Struggle with Price Plans as Market Swings
We know rollercoaster fuel price trends are tough on oil consumers, but we don’t always consider the challenge a volatile market presents for heating oil dealers. Large and smaller companies across the country have had to adapt their business models, trying strike a balance between protecting themselves and offering customers a good, fair deal, the Boston Globe reported earlier this week.
Many consumers remember heating oil prices hitting their all-time high in July of 2008 at the height of the recession. Crude oil prices skyrocketed to $145 a barrel, then plunged the following winter along with heating oil. When prices dropped, dealers were forced to absolve high-cost contracts to appease angry clients who’d signed expensive contracts out of fear prices would spike even higher.
“I think that was the tipping point for the industry and maybe for consumers too,” said one dealer in Quincy, MA, who stopped offering price-lock contracts several years ago. Instead, the company buys insurance to protect itself if prices go above a certain amount, and offer clients a price cap guaranteeing they won’t pay more than an agreed upon amount.
Memories of the 2008 fallout, along with concerns about the recession and political upheaval in the Middle East affecting production and prices, have caused some companies to try tactics such as implementing surcharges that fluctuate with fuel prices, or employing other technical fixes. While the industry is working through this issue, heating oil customers are advised to read their price plans carefully and remember dealers are also at risk of getting burned during these tough economic times.
“A lot of these businesses have had near death experiences,” said economist and analyst Chris Lafakis. “They clearly remember the stress and trauma that their businesses were put through during the recession and they’re trying to save costs where they can.”