In article , Boden says...

Banty wrote:
In article , dpb says...

Jeff Wisnia wrote:
...

I assume the dealers must have entered into futures purchasing contracts
with their suppliers to protect them against further price increases and
those contracts will have to be honored by the dealers unless they
choose bankrupcy instead.

I can forsee that the dealers are going to have a helluva time getting
all the customers who entered into guaranteed price contracts with them
to cough up what they agreed to pay when the retail market price of
heating oil drops significantly. Particularly so if those customers are
being negatively hit by other aspects of the current crazy economy and
use that as a justification to default on their contracts.

...

Southwest Airlines in a nutshell---they looked fabulous early on, now
they're also hurting in spades as their contracted fuel supplies are
still lagging current market prices.

If dealers were wise they didn't forward contract all or had some other
hedge positions. Homeowners may be stuck--that would depend on the
actual contracts.

For farm inputs (diesel, anhydrous, chemicals, etc.) there's a similar
situation/problem. Another is contracted grain to the ethanol producers
as an example. Some have defaulted on those _to_ the farmer or grain
dealers (local equity elevator operators and similar).

The individual homeowner is probably not out more than a few hundred
bucks to perhaps a thou while the others may be looking at up to the
million $$ range for larger operations.

Lack of stability in pricing is in many ways worse than absolute price.



I got caught in this, and locked in (not a ceiling, a fixed price) in late
August. Ouch.

Homeowners tend to do their heating oil contracts in late summer and early fall,
because usually thats just before anticipatec demand drives up prices. This
year, of course, that didn't work out quite that way! :-(

But I dont think other concerns like agriculture using fuel year round or with a
different seasonality would be caught quite so much as homeowners were this
year.

As for people reneging, some are if the penalty in the contract is a lot less
than the difference between what they project for costs during the winter going
by contract price vs. going by current price. Which is leaving the smaller oil
delivery outfits in a lurch.

I plan to stick to contract. I did fabulously with my contract the previous
year; I guess this year is my karma-payback ;-) Silly me I neglected to figure
in a worldwide economic meltdown starting September 15. I'm taking my crystal
ball into the shop for repairs...

Banty

Oil tanks aren't that expensive. If you'd put in a half dozen 330
gallon tanks you can store a season's worth of fuel. I did this and I
buy at several times through out the warm season to average the lower
prices. Why play the futures market?

And did that help you at all this year? This year, those who buy at current
prices during the heating season are the hands down winners.

So I don't see an advantage of your plan. Besides, I kinda like my finished
basement space.

Banty