Fall is coming to Rhode Island – which means heating bills are coming, too. The question is, how should you pay for your heating oil this year?
One option you have when you become a Vaughn Oil customer is to buy your heating oil with Price Cap price protection via our Smart Play Plus option. But how does a Price Cap work? This primer should help make things a little clearer for you.
Q. What is a Price Cap?
A. A Price Cap protects you from rising heating oil prices while also letting you benefit from falling heating oil prices. If you enroll in Smart Pay Plus program – which includes a Price Cap –you will never pay more than the price you agree on when you enter the contract, no matter how high the market price for oil rises – and if market prices fall, your price comes down too.
Q. Sounds great…what’s the catch?
A. There is a fee associated with enrolling with any Price Cap program; this fee covers insurance we have to buy to protect ourselves if market prices dip below our purchase price (since we buy our oil in advance based on your commitment). We don’t profit from collecting this fee; we just pass along the cost of the insurance. If your fuel supplier insists that he can provide price protection without charging a fee, what he’s actually doing is gambling with your money; see the last question below.
Q. What is “downside protection?”
A. To protect you from falling prices, we purchase options that allow us to sell back fuel to the supplier at the higher rate, and then buy more fuel at the new rate. This “downside protection” allows us to lower our prices when market rates fall.
Q. Is price cap protection always the best option for me?
A. Often, but not always. If you choose to pay market rate instead of buying with a Price Cap and the price of oil drops during the heating season, you would save money by buying at the market rate and by not paying a Price Cap fee. On the other hand, if you pay the market rate and the price of oil rises – as it has in most recent years, and will whenever it is at least an average winter temperature-wise – you would pay the higher price because you don’t have Price Cap in place.
Q. How is your Price Cap rate determined?
A. The Price Cap price depends on what we pay for wholesale heating oil. We do extensive research to determine the best time to buy fuel so you will always pay a fair price – guaranteed.
Q. When do I need to sign up for Smart Pay Plus?
A. There is no deadline for Smart Pay Plus.
Q. Some other companies aren’t charging for a cap. Why?
A. If a company doesn’t charge a fee for Price Cap protection, it is because they did not purchase insurance to cover their loss if prices drop. In other words, they are gambling with your money, hoping for the best. This is why so many heating oil companies default on their price protection programs, taking your money with them. You never have to worry about that as a Vaughn Oil customer.
Have any more questions about Vaughn Oil’s Smart Pay Plus program? Contact us today – we’re happy to help.