Oil Price Programs

Capped Price Program

A capped price program is a type of price protection program that establishes a maximum price per gallon that will be paid during a pre-determined period of time (usually a defined heating season). This maximum price is often referred to as the “price cap” or the “ceiling price”. With this type of program, customers will always pay retail price as long as that price does not exceed the ceiling price. If the retail price exceeds the price cap, the customer will only pay the lower, guaranteed ceiling price.

Some capped price programs establish both high end (or ceiling) and low end (or floor) prices. In this type of program, a range of retail prices is established within which the customer will be billed depending on market conditions at the time of order. With this type of program, if the retail price exceeds the price cap, the customer will only pay the ceiling price; likewise if the retail price falls below the established low end price, the customer will pay that previously agreed upon floor price. Often with this type of program, companies will offer the option for customers to purchase a downside price protection policy (at an additional fee) so that if the retail price falls below the floor price, the customer will get the benefit of the actual retail price on the day of order. This is sometime referred to as a capped program with downside protection.

Since an oil company contracts to buy oil with either a capped or fixed price protection program, there are usually liquidation charges and/or other fees associated with a cancellation of either type of price protection program or a violation of its conditions prior to the end of the agreed upon timeframe. Fees vary from company to company and are established at the time the programs are put in place.

Purchases of oil before and after the agreed upon time frame are typically billed at the retail price in effect at the time of order.

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Fixed Price Program

A fixed price program is a type of price protection program that establishes a firm, fixed price for oil for a given period of time. This means that for that agreed upon time, your cost of oil will not change and will not go either up or down. If the retail cost of oil goes up, the cost to the customer stays the same. Likewise, if the retail cost of oil goes down, the cost to the customer again stays the same.

Since an oil company contracts to buy oil with either a capped or fixed price protection program, there are usually liquidation charges and/or other fees associated with a cancellation of either type of price protection program or a violation of its conditions prior to the end of the agreed upon timeframe. Fees vary from company to company and are established at the time the programs are put in place.

Purchases of oil before and after the agreed upon time frame are typically billed at the retail price in effect at the time of order.