Glossary of Terms

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Glossary of Terms

Warmth Without Worry Since 1944

Glossary of Terms

Source: National OilHeat Research Alliance

Cap Pricing: A cap price creates a maximum price per gallon that customers will pay, regardless of whether the price of heating oil on the markets increase. However, it also allows the price of heating oil to fall if the price of heating oil declines during the heating season.

Fixed Pricing: The retailer and the customer enter into an agreement establishing a price for heating oil. This establishes a stable and known price for the heating season, and allows the customer to establish a firm budget for his or her heating needs. Fixed pricing may be varied by adjusting the number of gallons subjected to fixed price. Additionally, some of these agreements include provisions allowing the contract to be ended early for a pre-established fee.

Retail or Market Price: Prices move up or down during the heating season; retail price customers are not locked into a set price as they are with a Price Protection Program. The retailer typically sets his price for the day, and then deliveries are made at that price.

Payment Options:

In addition to the pricing options, the retail heating oil industry often provides different options for payment.

Payment by Delivery: The most typical payment option is to pay for the oil after it is delivered. The oil company delivers to the customer, and leaves a ticket at the door with the number of gallons delivered and the price. The customer will then have 30 days or before the next delivery (whichever comes first) to pay the bill.

Prompt Payment Discount: The customer will recieve a discount on the delivery if the delivery bill is paid within five business days. If the customer foregoes this option, the bill must be paid within the 30 day or before the next delivery time frame at the higher "credit" price per gallon.

Budget Plans: Another common option is for the dealer to estimate the number of gallons the customer will use during the heating season, and the expected price. The dealer then divides by the months that the bill will be paid, typically 10-12 months, and the customer makes monthly payments. This allows for smooth payments that are easy to budget. Some dealers will make minor adjustments in the season to keep a smooth billing cylcle, and others will do a settlement bill at the end of the budget program. Many dealers will include price protection options in their budget plans.

As a result of the competitive nature of the industry there are many different pricing alternatives. It is important for customers to understand their pricing options and pick the one that is best for their family or business.

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