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Oil Price Programs

Price Programs

At Tragar, our customers are the most important part of our business.

Whether you are renewing your commitment or becoming a new Tragar Oil customer, you become part of our family and we take care of our customers by providing quality services for the best possible value.

Please become familiar with our pricing programs.  They are designed to accommodate the fuel oil price volatility during winter months and provide flexibility to best accommodate your spending choices.

ARE YOU INTERESTED IN TODAY’S COMPETITIVE PRICE?
Please call our office.  This page only explains how our price programs work.

Buying and Selling oil is the most complex aspect of the heating business.  Price programs are also complex.  This page is made available to fully explain how we design our price programs.  For a more brief explanation, you may also call our office.

Definitions:

Pricing Period: 
The contract start and finish dates

Price Program:
Is the contacted price for fuel oil and the choice of service that is agreed on for a specific “Pricing Period.”

Futures Contracts:
Oil contracts that are bought in advance with oil wholesalers.  These contracts commit Tragar to a price of oil for a given period of time and are non-negotiable.

Downside Insurance:    
A futures contract is a fixed price.  If Tragar would like to offer price programs that provide flexibility for our customers, we must also purchase downside insurance.  Downside Insurance is a second contract that in the event the market price of oil falls we can average down the original price of our futures contract. The market price must first fall below the downside insurance deductible.  This is a contracted price in the downside insurance contract.

These contracts are complicated and predicting the price of oil is like predicting the weather.  Downside Insurance comes with a high risk and anything risky is always expensive.  The price of oil must also fall significantly before this insurance becomes active.  These contracts are only purchased to protect our customers from a sudden fall in price.  An example would be the 2006-2007 heating season.  Many of our customers were in collar price programs (see below).  Heating oil fell by almost $.50 cents that season.  We purchased futures contracts to provide the cap price, however also purchased downside insurance.  The downside insurance allowed us to fall with the price of oil and deliver our customers at their bottom collar price.   

"Valued Added Pricing"
Price Program:

This is the traditional method for delivering heating oil.  The delivered oil price is marked up the value necessary for us to deliver oil to your home. 

 

“Fix” Price Program:

Our fixed price program is an established price.  Tragar secures oil for our customer in advance on the open futures market.  Our customer agrees to pay the fixed price per gallon even if the market rises or falls during the heating seasons pricing period. 

 
"CAP" Price Program:

Our Cap price program is a fuel oil price with a ceiling.  Our customer is never delivered at a price above the agreed ceiling or CAP price. 

Tragar again secures heating oil contracts for our customer in advance on the wholesale market for a specific price.  The price that Tragar pays varies by the month and even the day.  The delivered price depends on the price of the contracts bought for the customer’s specific delivery date.   

This type of program allows for market changes. You will know from the beginning of the season the highest price you’ll be charged for the entire heating season no matter how high heating oil prices may get throughout the year.

If the price of oil falls, so can your price.  Although contracts are bought in advance, Tragar must consider the weather, our customer’s consumption patters and many other undeterminable industry factors.  Therefore we only purchase approximately 80% of our oil for any given day.  The remaining 20% of oil delivered every day is picked up on the daily market.  If this daily retail price goes is expensive, the customer pays a more expensive price (never to exceed the cap), but if the retail price goes down the customer pays a lower price.

Future oil contracts enable us to lock in a price and pass the price on to you, but we also have to pay for downside insurance to protect these risky investments. The cost of this insurance, often called is also included in the price per gallon.

 

“Collar” Price Program: A high price ceiling  and a low price bottom

The Collar program is very similar to the cap price program.  Tragar purchases contracts in advance, however instead of incorporating the price of the downside insurance in the price of oil, Tragar offers a bottom price.  If the price of oil falls you can feel confident that your price of oil will also fall, however your price will not fall below the bottom price.

The advantage to the consumer with a collar program is that by not including the price of downside insurance in the price per gallon, the “cap” price in the collar program will usually be less expensive then a cap price in a “cap price program.”

 
Due to increased volatility among the factors that control the price of heating oil (the middle east, politics, hurricanes, decreased storage and refining capabilities, climatic changes), heating oil is more unpredictable then ever before.  The price of energy is now changing by the day, by dollars instead of pennies.  It is not till the end of the winter that you or we can tell whether cap or fixed price programs are a better value than if we delivered oil to you the more traditional “value added” way.
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