Quote:
Originally Posted by spence
In the end it's all a wash...
-spence
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I agree. The oil company simply takes the funds you forward for "price protection plans" and purchases oil futures contracts with them to fix their price and max profits. In the long run I'm sure you break even at best using their plans.
If you want to get real crafty, buy the futures yourself through a broker. Create an "oil account" with your personal funds. Base the account needs on the amount of gallons you purchased last season and hedge against a price increase with futures or options. Fix the price on the oil yourself. Most of these plans involve an outlay of 200-300 bucks on your part. You could hedge a price increase for six months with that kind of money and your risk is limited to your 200-300 bucks if the price drops. Probably too much of a pain for most, but I back tested this against my own oil consumption in 2007-2008. A 300 dollar outlay would have saved me $2000. Minus the $300 futures contract, I would have net savings of $1700.
Disclaimer: The price of oil increased 125% over the time period I'm using for an example. If you think oil will skyrocket again, hedging may be a viable option for you. Just a thought....
To answer the question a little better, my company offered a price cap of 4.45 for six months or a pre buy at 4.29. This was as of Aug 15th. Price cap means you pay $25 for every 100 gallons of oil you consume. In my case it would be $250 based on our winter consumption(1000 galons) last year. This would protect me from any increase over 4.45 for six months. If the price drops, we pay the lower price.