Thursday, 9 February 2017

How to cut the cost of heating oil

Filling up the oil tank. Outfit: delivery man's own.

One of the big changes in moving from London to Suffolk has been adapting to the harsh realities of heating oil.

We swapped a connection to the gas main for a large oil tank squatting in the garden. Our heating, our hot water, and previously even our cooking, all depend on oil.

Posting last month about our oil bill really made me think about the differences.

Several people commented with surprise at the cost - but only those with gas boilers. I suspect anyone else who relies on heating oil was too busy licking their wounds about recent price hikes!

With gas, I could check prices once a year or so, switch to the cheapest deal, and then relax knowing that so long as the direct debits kept going out, gas would keep heating our home.

One of the big differences with oil however is the very real risk of running out.

Imagine it - frost outside, chilly inside, but oops no heating because you've used up all your oil. We've haven't actually run out (yet) but came pretty close to it the first winter when we hadn't worked out how to use the fuel gauge on the side of the tank.

Unlike gas and electricity, heating oil customers can't go running to Ofgem if they have any problems. The heating oil market isn't regulated.

Since moving to an oil boiler, I've had to adapt to checking the oil level, estimating how long it will last, checking oil prices, guessing future price movements, ringing round for quotes,  allowing for 5% VAT, juggling amounts, prices and delivery times, waiting for the tanker to show up and gritting my teeth as I pay the final bill.

We've also had to adjust our budget - rather than allowing for a modest monthly direct debit, we face a massive bill at irregular intervals.

Because the real crunch for us, along with more than 1.4 million other households in the UK who rely on heating oil, is that we are at the mercy of oil prices.

Boy, has that been a rollercoaster ride over the last few years. Politics, terrorism, OPEC agreements, weather conditions, fracking and exchange rates have sent oil prices all over the place.

Sure, gas and electricity prices go up and down. But I've never experienced the same peaks and troughs as I've seen since moving to oil.

If you've tried to exchange money for a holiday abroad, you'll be aware that post-Brexit your pound buys a lot less than it used to. Now remember that oil trades in dollars - so today anyone with an oil boiler gets less oil for the same amount of pounds.

So for example, our very first oil delivery back in October 2014 cost 48p per litre.
48p might not sound very much.
However, when you're ordering 2,000 litres at a time, that adds up to £1,008 with a dollop of 5% VAT on top. Ouch.

Since then, we saw the price drop by a quarter to the following January. Hurrah!
When I checked prices a year later, January 2016, oil had dropped to a six year low, at only 23.07p a litre - less than half what we paid for our first delivery.
I wrote an article for the Sunday Times and a blog post about heating oil roughly when prices hit their lowest point.
However, by last month, January 2017, prices had soared right back up to 44.75p a litre.

So in two and a half years, we've seen the price of 2,000 litres of oil start at £1,008, drop to less than half at just under £500, and then almost double again in a year, up to £940. Talk about a moving target!

As you might guess given the size of the bills, I'm pretty keen on cutting the cost of our oil.
Just like most household bills, you can cut your cost in two ways:
- using less
- paying less for what you use

This post talks about how to pay less for heating oil, and I'm hoping write a separate post about how to use less in the first place.

Here are my six top tips on how to cut the cost of heating oil:


1. Don't leave it till the last moment


Ordering oil is a nerve-wracking process, if you're hanging on to delay a big bill, or hoping that prices might fall.
However, running out of oil is no fun and no-one wants to risk sludgey stuff from the bottom of the tank oozing into your boiler and causing chaos.
You can also get stung financially if you have to order oil in a hurry, rather than being able to wait a couple of weeks.
For example, when I got a quote from BoilerJuice, an oil comparison site, in January, it quoted 44.58p per litre - provided I could wait for two weeks.
The price for an emergency next day delivery soared to 50.56p, adding an extra £125 to the cost of 2,000 litres. Today, it's saying I couldn't get any oil for five days at the earliest, as their suppliers are too busy to make emergency deliveries.
So the main message is: save money by ordering in advance.

2. Watch out for the weather


On top of all the global factors affecting oil prices, local weather can also have a big impact.
If it suddenly turns chilly, and everyone fires up their boiler and discovers they need more oil, then prices can rise and delivery times can lengthen.
In the past, it tended to be a good plan to stock up in summer, and avoid for example a rush just before Christmas. I'm slightly wary of this advice, as by the end of 2015 prices were lower than during the summer, but then last year a summer delivery would indeed have been cheaper.
Fundamentally it all depends on the size of your oil tank. If it's already full, you can't add any more!

3. Buy in bulk


The minimum order for heating oil is typically 500 litres, but if you buy bigger quantities you can typically get a better (read cheaper) price per litre.
We have a pretty big tank, so I tend to hang on until I can order about 2,000 litres a time.
The alternative is to club together with other people to benefit from a bigger order.
BoilerJuice, the comparison website I mentioned, will pass on savings if it can include your delivery in a larger group order.
I also recommend checking if there is an oil club in your area, so you can join a bulk order.
I signed up for free with The Oil Club, and get emailed once a week with the rates for the snappily named "Hadleigh, Lower Layham and Raydon Heating Oil Club". Typically, the oil club prices are pretty low, but you do need to allow up to a fortnight after the email for the oil to arrive. Miss the Monday midday deadline for ordering, and you could delay your delivery for an extra week.

4. Compare quotes


In addition to the comparison sites, I ecommend getting quotes from a few local suppliers.
You don't even have to wait to ring during working hours, as many of the bigger companies will email a quote after you've plugged your details into the website.
I tracked down suppliers by googling "heating oil Suffolk", but you can also get a list of accredited suppliers from the Federation of Petroleum Suppliers

5. Start bargaining


This is the part I like least.
If you want to shave off some cash, start ringing round suppliers, asking if they can beat the lowest quote you've had elsewhere.
Heating oil companies seem to be used to people asking for a better deal, so there's no harm in trying.
I find that if I ask for a quote online, some of the companies then ring me the next morning, which can be a great time to say "Oh, I was quoted a lower price of xp per litre by another company, what can you do?".
I keep in mind that every half pence off the price of oil saves me £10.50 when ordering 2,000 litres. On occasion I've been willing to pay a bit higher to a local company, Goff Petroleum, knowing that they will deliver quicker than if I have to wait for the Oil Club. Goff is also willing to fill up the tank, rather than delivering a fixed amount based on me staring at a transparent tube and guessing.
Alternatively, the heating oil comparison sites like BoilerJuice and Fuel Tool suggest that you save time, effort and energy by ordering from them rather than ringing round and getting your own quotes.

6. Beware of payment plans


The downsides of ordering a tankfull of oil each time are a) big bills and b) the forking out for a big bill, only to see prices plummet afterwards.
Instead, some oil suppliers offer payment plans, where you sign up for a regular monthly direct debt designed to cover the annual cost of your oil.
However, you are then tied in to buying oil from that particular supplier - who may not offer the cheapest prices in future.
Instead, I reckon you'd be better off setting up a standing order into a bank account of your own, which can then be used to buy oil for the lowest price when needed. If you use a high interest current account to stash your savings, you might even be able to earn some extra interest before paying the bills.


Anyone else have any top tips for how to pay less for heating oil? Or a sense of relief at relying on good old gas? Do share your advice in the comments below, I'd love to hear!

7 comments:

  1. What a timely post.Thank you.
    When we move - in the next 2 or 3 weeks we hope - we will have oil central heating for the first time ever. It's going to be quite a shock I think. But we will be out in the wilds so no choice.

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    1. Very exciting about the move, do hope it all comes together, and glad the post might be helpful!

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  2. My family in the States had oil for heating for 60 or 70 years about 50 miles from New York City, so cold mid-Atlantic conditions. Our only recourse was to fill in May or June for cheaper prices. No other strategy seemed to work! Such an interesting read, thanks!

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    1. Glad the "fill up in summer" strategy worked for your family. We're trying to cut down on the amount of oil we use, so it may yet become possible for us to stock up ahead of time, rather than just using it all up before the colder weather comes.

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  3. More insulation helps with the "using less fuel" routine! Same States reader, Laura

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  4. Re. running out - I don't have to imagine as this happened to me far too many times! I relied on oil for 6 years before moving to a house with gas central heating - I might as well have been handed a diamond tiara and the keys to Bucks House, the way I felt when I turned the heating on there :)

    These are good tips, wish I'd have been more clued up back in the day.

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    1. Thanks Lee! Glad you're relieved to be on the gas network now. Our oil bills are so chunky I've been keen to find out how to make some savings.

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