Advice: When to Lock In Heating Rates

By comparison, Py says an increase of half a cent would have been big news 10 years ago.

Today, many of the fixed-price programs are available for about $4.65 a gallon. Last year, the same programs were going for $2.50 to $2.60 a gallon. For a typical household using 1,000 gallons of heating oil per year, that's an extra $2,050 to $2,150 drain on the annual budget.

So as a consumer using oil to heat your home, what can you do?

The best advice is to reduce your consumption. As a consumer, you have very little control over what energy prices will be in the future, but you can take steps to significantly reduce the energy you use by conducting an energy audit, upgrading your heating systems and ensuring you have the proper amount of insulation. More information is available from the Department of Energy.

If you can't afford to pay $5 a gallon or more in the middle of winter, then you may want to contact your dealer now and find out what programs it is offering for a fixed price. Even though you risk paying more than you need to for heating oil, the consequences of running through your home heating budget by February are worse.

It is important, however, to choose a fixed-price plan rather than a fixed-payment plan. In the latter program, your actual bill won't change from month to month, but you may be left with a hefty balloon payment at the end of your contract if prices continue to rise.

If $5- or $6-a-gallon gas this winter would hurt, but not force you to give up on necessities like food and medication, you may want to take a wait-and-see approach. If there is in fact a bubble in the oil market, then there is a chance that it could burst and bring prices down to a more reasonable level.

Nevertheless, winter oil prices have declined only twice over the past 10 years. That means that 80% of the time, signing up for a fixed-price program was the right decision.