Advice from the Department of Consumer Protection Regarding Contracts
Given today's oil market, pre-buy contracts are risky, since you don't know if the price will drop in the near future. If you do a pre-buy contract, use a credit card that has purchase protection and buy only from a dealer that you have done business with in the past.
Consumers who buy lock-in contracts are doing just that - locking in
their price for later delivery at an agreed on price and those contracts
are a guarantee of what the consumer will pay - NOT a guarantee that the
price will be less than the market price at the time of delivery. Under
CT law retailers cannot offer these guaranteed price contracts unless
they have bought at least 80% of the oil from their supplier, again by
contract. The retailer, having paid likely over $4 a gallon a few months
ago and resold it for $4.69 doesn't get a lower price from his supplier
- which is why the consumer's price doesn't change either.
Last spring, at the end of the 2007/08 heating season consumers wanted
their contract price from the previous summer [2007 summer] when they
locked in at $2.50 because the retail price went over $3.30 as many contracts
were expiring. Now consumers who bought contracts a few months ago want
to bail on them before this winter even begins? Consumers who fail to
realize these the potential of these circumstances really shouldn't be
buying lock-in contracts. As I've said on your show many times, if you're
risk averse and understand these are only a guarantee of what you will
pay - not a guarantee you will save, then these are for you. If you're
not risk averse and watch prices constantly to measure whether you're
up or down versus retail - these are NOT for you.
