Oil, natural gas, propane and, to a lesser extent, even electricity prices are coming down and consumers are saving money. That’s a good thing. But when I recently assisted a client with price shopping utilities, I was surprised to learn that there are HUGE price differences from one company to the next.
This means that there are savings which a large number of people (maybe you?) are missing out on. This prompted me to do a little bit of investigating on my own.
My Research and “Unofficial” Utility Provider Survey
Certainly, you would expect prices for gas, oil, propane, and other utilities to differ to some extent between companies based on geography, inventories, and weather—all of which play an important part in pricing by region.
But when I researched the price of oil in the Mid-Atlantic region, for instance, I found a price variance of as much as 65% between companies! Unfortunately, my client was on the top end of the rate curve, ultimately paying hundreds of dollars more than the least expensive provider in the market.
I wondered how this kind of variation was possible when we are talking about a commodity, so I called a few providers (actually supervisors) to ask why their prices were so much higher than others. I received the following responses:
- “We purchased future contracts last summer and locked in our rates for the year.”
- “We offer guarantees to our customers that their rates won’t exceed a certain amount, so we have to build that into our pricing.”
- “Our customer’s are more focused on quality of service and our commitment to same day delivery.”
- “The folks offering cheaper prices won’t be in the market long at those cheaper prices.”
- “Cheaper providers use many more additives in their fuel, so you are not getting apples to apples.”
As you can see, these company’s excuses for higher prices varied almost as widely as the prices themselves. But do their responses make sense? I say no.
First, there is no difference in fuel from one company to the next as they all get it from the same holding tanks. Yes, there are companies that put additives in their automobile gasoline, but this is to improve the car’s performance, not to degrade the base product.
The remaining responses appear to be individual company practices or simply opinion. Of course, it’s up to you if you want to pay the higher prices for these, yet my guess is that most of you have simply been on autopilot with your utilities and just haven’t taken the time to shop for a lower price.
In the end, it’s apparent that some businesses are not doing right by their customers. That’s why The Corporate Oversight Division of the Office of the Attorney General is actively investigating propane and natural gas suppliers due to claims of price gouging. Crude oil is a great example of this.
Crude oil prices have been plummeting since June 2014. The initial fall was rapid and unexpected, and recent events such as the fall in Chinese growth projections and the end of sanctions against Iran have given economists even more reason to downgrade their expectations for crude oil prices.
While lower fuel prices are great for the consumer, we know that not all of the cost savings have been passed on to the general public. In other words, the lower price of oil is slow to reach the pump, but it is enabling refiners to increase their profits instead.
My Advice To You: Caveat Emptor
If I could leave you with one advice when it comes to utility pricing: caveat emptor, or “let the buyer beware!”
Take the time to shop around and compare prices from utility companies, including electric suppliers too. By locking in a rate for a couple of years, you can potentially save quite a bit of money. The end product is exactly the same.
I was able to save my client thousands of dollars in 2016 by doing this. Isn’t it time you do the same?