Best Time To Pick Heating Oil Plan -- Now?

June may seem like a strange time to think about home heating.

But now is when many oil companies give customers the option of locking in a pricing plan to help them manage their fall/winter heating bills.

And on The Early Show Saturday, financial journalist Vera Gibbons explained how to choose the one that will best work for you — to help protect you from price volatility:

As oil prices continue to rise, many Americans are searching for the best and most cost-efficient ways to buy it, assuming they stick with oil and don't convert to another fuel.

And many local oil providers are offering pricing plans.

There are generally four different plans to choose from: fixed, capped, budget, and pre-payment plans, some affording at least limited protection against dramatic increases in fuel prices.

Some companies are delaying rolling out these plans, others are just now starting to, and will continue to do so over the course of the summer.

But it's a real struggle because of the volatility out there. Will oil prices go up? Will the bubble burst and will prices come down? It's a guessing game.

There's a lot of uncertainty out there, and how much you pay for your home heating oil is largely determined by the price of crude.

Fixed Plans

Fixed programs allow you to pay a set price per gallon throughout your contract. The price you're paying is based on what the market expects prices will be this winter.

Capped Plans

With a capped plan, you're paying market prices, but only up to a specified amount. If prices fall, you get the lower rate. So, for example, say you have a five dollar cap. If heating oil goes to $5.50, you still pay only five dollars. You're never going to be billed above that. And if heating oil goes in the other direction, and drops to four dollars, you're going to get that lower price.

Budget Fixed/Capped

You've got the budget versions of both "capped" and "fixed," in which you can spread your payments out over 10, 11 or 12 months.

Pre-Purchase

With pre-pay or pre-buy plans, you buy all of your oil now for the entire winter. There are no multiple bills, you're writing one check for the season, and that check could easily be $3,000-$4,000, if not more!

How do you know which plan is best?

There are pluses and minuses with each. Going with a fixed price contract buys you peace of mind, and can be a good deal if prices go up. But you won't be happy if prices go down. And if prices go down and you want out, there are all sorts of surcharges and cancellation fees to contend with, often $200-$500. Yes, you're paying a premium for that protection, anywhere from $125-$300, depending on where you live and how much fuel you use.

Bottom line: None of the programs that are offered guarantee savings; they only guarantee what you will pay. Very few consumers are pre-buying these days, and they're going with budget plans if they're offered. There's a lot of variation out there!

With a budget plan, instead of paying a single, large bill with each delivery, you're spreading the payments out over eight or 10 months. It's the most manageable way to go, particularly now, with gas, food and energy costs all up.

Nobody is immune from price hikes — even those who don't heat with oil

Heating oil is up 32 percent from last year, natural gas 14 percent, propane 18 percent, and electricity four percent.

So, prices for just about all forms of home heating fuels are on the rise.

TIPS TO KEEP COSTS DOWN IF YOU USE OIL

Shop around

See what's out there. Call at least half a dozen companies, because prices can vary by as much as 20 percent in a local market.

Ask about additional fees

Ask about any additional fees. There may be various fuel surcharges, fees for weekend deliveries, emergency deliveries, inclement weather deliveries, fees if you don't buy a full tank, etc.

Ask about discounts

You may get a discount for large deliveries, or if you pay with cash. You may also qualify for discounts if you're a loyal customer, or elderly or disabled. And, if you're on a limited budget, you may also be eligible for federal and state assistance programs.

HOWEVER YOU HEAT YOUR HOME, WHETHER IT'S OIL, PROPANE OR NATURAL GAS, ONE RULE IS THE SAME FOR EVERYONE: CONSERVATION IS KEY

Summer is a good time to schedule your annual tune-up on your heating system. Make sure you have a high-efficiency furnace, and have it tuned. You should also hunt around for drafts in windows and doors. Up to 30 percent of heating (and cooling) is lost if windows and doors don't seal properly. Tighten up the house, and make sure it's properly insulated. It's a big incentive these days, given the high prices, to conserve, to be proactive.