Fuel Oil Lock In Plan?

[Spartacus]

Would it be best to lock in for a guaranteed price for the the coming heating season? I would think so but it appears that the guaranteed price is 40 cents higher than what I paid for my last fillup in March. I should also mention that I live in New England and likely won't fillup until late November. I used 900 gallons last year.

They also offer an additional discount of 5 cents per gallon if I prepay for the season. I have ruled this out given that ING pays over 4% and the discount works out less than 2%.

I'd appreciate any feedback particularly from others with similar circumstances.

[otctrader]

[ QUOTE ]
Would it be best to lock in for a guaranteed price for the the coming heating season? I would think so but it appears that the guaranteed price is 40 cents higher than what I paid for my last fillup in March. I should also mention that I live in New England and likely won't fillup until late November. I used 900 gallons last year.

They also offer an additional discount of 5 cents per gallon if I prepay for the season. I have ruled this out given that ING pays over 4% and the discount works out less than 2%.

I'd appreciate any feedback particularly from others with similar circumstances.

[/ QUOTE ]

Good question; I don't follow heating oil, but we have deregulated natural gas supply here in NY, and it seems like a compelling idea with December '06 nat gas futures trading at 52-week lows in front of the usual "seasonal" ramp up and hurricane season shenanigans. Even if we don't get a landfall catastrophe this year, any strong Gulf storm heading toward the rigs will send gas skyward.

For what its worth I submitted a request for independent energy bids a month ago (NY calls it ebids), and the providers offering 1 or 2 year locks did NOT come up with very competitive quotes vs. what I've been paying month-to-month.

Keep in mind if you pursue a contract like that, you're essentially buying a call option on natural gas (or heating oil), so compare the EV of a supplier lock to hedging outright with energy derivatives @ NYMEX, which is where your supplier will lay off their risk anyway. My guess is you'll find more competitive pricing with the latter approach, but the contract sizes may make it prohibitive to accurately hedge for small residential use.