Residential - Tips & tricks - Heating with oil

In the years 1960 to 1980, almost 80% of Quebec homes were heated with oil. Today that proportion has plummeted to 17%. The phenomenon has led to the near-extinction of the local home heating oil supplier: these days, only oil companies which are able to handle both the financial risks and the vagaries of chaotic supply conditions can offer the service. This leaves you, as a consumer using oil, in a somewhat uncomfortable situation. Which supplier should you buy your heating oil from? What payment options are available to you? What points do you need to focus on when comparing one potential supplier to another? What strategies can help you save on heating oil? The following information is designed to help you make informed decisions on that matter.

Profile of Quebec heating oil suppliers

There are currently only six major distributors of home heating oil in Quebec: Esso, Joseph Élie Ltd., Petro-Canada, Huiles Norco (Shell), Pétroles Sonic and Ultramar. Of these, only three are producers and importers of crude oil (Esso, Petro-Canada and Shell). Ultramar specializes in refining and distribution, while Sonic and Joseph Élie Ltd. are active solely in distribution of petroleum-based products, including home heating oil.

While a quick search does reveal some 360 independent distributors in the province, most of whom serve areas outside the two major urban centres (Montreal and Quebec City), the fact remains that they have no choice but to deal with the “big six” distributors to purchase their wholesale product, the direct result of which is price levelling. And although the price wars that flare up between the oil companies can play in your favour as a consumer (i.e., if the price of crude goes down), they can also be to your disadvantage (if oil prices rise).

Given that the average heating oil tank has a capacity of about 1,000 litres and a fill-up costs near $0.80 per litre (transportation and taxes included), it doesn’t take long to run up a pretty big bill, so some sort of payment plan is often a must. That’s why it’s important to shop around before signing a contract with a supplier.

Choosing a supplier

Before ordering home heating oil for the season, you want to take the time to estimate, as accurately as possible, how much fuel you use. Consider consumption habits, the number of heating devices (e.g., furnace) along with their type and age, etc. Once you’ve established how much oil will be needed for the season, it’s time to shop around for a supplier. Don’t hesitate to ask the suppliers in your area what they can offer you to beat the competition (e.g., bonuses, gifts or other incentives) and whether, to qualify for a payment option other than one tied to the market price, you must commit to purchasing a minimum quantity of oil. Compare the prices quoted, the billing options and the up-front costs that come with each type of contract. You will notice there are several types available to you, and it’s important to familiarize yourself with each, so you can make an informed decision when it is time to sign on the dotted line with a particular supplier.

The supply contract and the payment options

The supply contract, as its name implies, is the contract you sign with a supplier under which the latter guarantees delivery to you of a quantity X of heating oil at a frequency Y.

As for payment options, there are several. Generally, your annual oil consumption, the client group you are part of and the types of heating system and equipment you own (e.g., bi-energy, with or without oil-fired hot water heater) are determining factors in choosing the payment option best suited to your situation.

Choosing a payment method

Fixed-price contract

The fixed price is the forecast average price of heating oil for the season, which generally runs from October to May. The final amount billed depends on the amount of oil consumed during the season, but—and this is the key advantage of this type of contract—you know exactly how much you will be paying per litre. Variations in the price of heating oil due to market conditions (be they favourable or not) will have no impact on the amount fixed upon signature of the contract. This means you won’t have to pay more if the price of crude oil rises sharply (“spikes”) during the season—but it also means you won’t benefit from any eventual price decrease.

Consider this…
Fixed-price contracts are subject to administration fees, which vary between $25 and $75 depending on the supplier.

Capped-price contract

Unlike a fixed-price contract, this type of contract does allow you to benefit from drops in the price of heating oil: the amount payable varies with the market price, but you have a guarantee that the price will never go higher than the maximum set when you sign the contract. Usually, the capped price is higher than a supplier’s fixed price: the difference is the premium you would have to pay to benefit from any favourable market price fluctuations during the season. By choosing this type of contract, you are in a way buying yourself peace of mind.

Consider this…
As with a fixed-price contract, expect to be charged administration fees of between $25 and $75, depending on the supplier, if you choose the capped-price option.

Equal-payments contract

With this type of contract, the supplier prepares an estimate of your annual heating oil consumption, taking into account factors like past consumption, the mean temperatures in your region, the number and age of the oil-fired devices you own, etc. The total amount billable per that estimate is then spread over 12 months. This way, you don’t worry about receiving a gigantic bill at the end of a particularly cold month: the months during which your real consumption is low or zero (e.g., in the summer) compensate for those in which you burn the most oil.

Consider this…
The estimate that the supplier provides is not carved in stone. If, during the year covered by the contract, your consumption varies to the extent that adjustments to the forecast are necessary, then two options are possible: revise and adjust the amount of the equal payments, or balance the account after the 12 months have elapsed, by means of a final payment or reimbursement.

“No-contract” option

As the name implies, if you choose this option you do not bind yourself by contract to any one supplier. You simply wait your tank is almost empty, call around, and go with the best price offered.

Consider this…
This option is like a roll of the dice: it might be very much to your advantage, or it could just as easily be a disaster. You are entirely at the mercy of events and market conditions.

How to save on oil

You should now have all the information you need to select the heating oil supplier and contract that offers the greatest benefit to you. Now, here are a few simple, sensible solutions that you can implement to avoid wasting the precious fuel that you’ve taken such care in choosing:

  • Install a programmable electronic thermostat;
  • Conduct a regular annual tune-up of your heating system;
  • Improve the insulation in your home as well as the airtightness (doors and windows);
  • Think about replacing old, under-performing heating equipment.

Sources:
AQCM (Association québécoise du chauffage au mazout)
CPPI (Canadian Petroleum Products Institute)