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Saturday, July 26, 2008

Home Heating Oil—Look Out!

I talked to my home heating oil company this week. I am on the 9 month budget plan and my budget will increase $160.00 per month over last year. Yeah, that is $160.00 more per month, outrageous. My cap on the budget plan is $4.99 per gallon for heating oil. That is what my budget is based on. If home heating oil goes higher than that I am capped at the $4.99. Assuming I use no more oil than I did last year I know exactly what I will pay. If oil goes down in price, I will pay the lower price but I won’t benefit until the end of the budget and then I will get a refund. The oil company gets my money and any interest they can generate if the price goes down. I get the safety of a cap if the crazy market gets crazier and I don’t get penalized if the price goes down.

The other alternative that some of my friends are doing is the prepayment option. The lowest I have heard is $4.59 per gallon prepaid based on last years use. Based on my usage that would be about $3000.00 prepaid to lock that price. The operative word there is locked. You pay now, they get your money and if the price goes down, tsk tsk. Maybe I am too naïve to expect that some sort of reasonable market correction will bring the price down but I am willing to gamble that my budget plan is going to be less out of pocket that the prepaid plan. Particularly since I don’t want to fork over $3000.00 up front.

Now is the time to be talking to your oil company about the cold weather. Look and see what makes the most sense for you and you guys heating with natural gas, quit laughing and leave us oil burners alone.

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