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Pgagnon Price Protection FAQ
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Price Protection FAQ
 
How does a price cap work?
Is a price cap better than a fixed price program?
Why is there a fee for the price cap?
Is price cap protection always the best option?
Which way are prices likely to go?
Can I call for my oil and still enroll in your program?
How do you determine what the price cap will be?
 
Q: How does a price cap work?
A: A price cap puts a ceiling on how high your price can go, but it also allows your price to drop if the market falls.
 
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Q: Is a price cap better than a fixed price program?
A: We saw again last year how risky a fixed price can be. It can’t go down. So if you want price protection, a cap is a much smarter move, even though it costs money. 
 
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Q:  Why is there a fee for the price cap?
A: We do not provide price protection on our own, and do not speculate on which way prices will go. We purchase price insurance through our suppliers. Unfortunately the cost of the insurance has risen dramatically over the last few years. For those customers who wish to purchase price protection we must buy the insurance to make sure you are covered. Because of this cost we must charge a fee.
 
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Q: Is price cap protection always the best option?
A: Not necessarily. We make the price cap program available to our customers, but by no means do we think that everyone should be on it and we do not make money on the fee. We have no way of knowing whether this “insurance” will pay off, or whether prices will go down and never hit the cap level.
So, if you choose to pay our market rate instead of choosing our price cap protection, and the price of oil drops during the heating season, you would save money by buying at the daily rate. You would also save money by not having to pay a price cap fee, which we are forced to charge due to the ever-increasing volatility in the oil market. On the other hand, if you pay the market rate and the price of oil rises, you would pay the higher price because you don’t have a cap.
Whatever you decide, know that our commitment is to take the best care of your family we possibly can—especially in these uncertain times.
   
 
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Q: Which way are prices likely to go?
A: We wish we could tell you, but it’s like trying to predict the stock market. Often the oil markets are driven by pure speculation without a fundamental basis for their up-and-down movements. Last year was a perfect example.
 
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Q: Can I call for my oil and still enroll in your program?
A: Unfortunately no. Because we contract for the oil ahead of time, we need to be able to predict when we’ll make deliveries, and we can’t do that when people call haphazardly.
 
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Q: How do you determine what the price cap will be?
A: Planning for price protection the right way is a year-round effort. We analyze pricing trends, study the commodities market daily and do a lot of research so we can decide when the time is right to make our bulk fuel purchases. Only in this way can we structure a reliable workable program, one you can count on for protection from unpredictable spikes in the price of fuel. It takes time and money to structure a price cap program correctly and not all heating fuel dealers have the resources to do it, especially in the current market. The price itself of the cap depends on the wholesale price we pay, plus an allowance to cover our costs, such as insurance, vehicle maintenance and employee wages.
 
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      215 Main Street, South Berwick, ME 03908 P: (800) 696-2213  
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