For a few years, we had oil price contracts with our home heating oil supplier. Basically, these are annual contracts where you lock in your price (or alternatively, a price ceiling) for the entire length of the contract.
When our last contract expired in July, the lock-in price was an astounding $5.15 per gallon. At that point in the summer, gas prices were nuts and everybody was nervous that they were going to get even worse.
I passed on the contracts (even the price ceiling) and for this winter we’re going to be working without a safety net. So if oil goes up to $6.00 a gallon, I’m super screwed and we’re going to have to start burning our furniture in the fireplace or something else downright Dickensian.
I felt that the price spike would influence demand – even then China was reducing its fuel subsidy for its citizens – and demand would drop and prices wouldn’t stay that high unless there were severe refinery outages.
The gamble seems to be paying off…but I do feel sorry for those folks who were scared enough to lock in at the over $5.00 per gallon price – they’ll have to live with that until next summer.
Will the bad PR cause:
A. some of those contracts to be cancelled?
B. some great bailout by Congress?
or C. will these folks be sleeping in houses that are 55 degrees?
My guess is C.