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What is a heating oil contract?
A heating oil contract is an agreement to purchase or sell fuel for delivery in the future: (1) at a price that is determined at the time the contract is executed (usually 10 percent less then wholesale); (2) that commits each party to the contract to fulfill the contract at the specified price; (3) that is used to assume or shift price risk; and (4) that may be satisfied by delivery or offset by selling the contract prior to expiration.
Dealers typically cover their pre-buys and fixed-price contracts by signing similar deals with their wholesalers - some states require it. Dealers cannot get out of those contracts when prices decline, which means the customer has to honor their contract as well.
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What is a heating oil contract?
