Fuel Services, Inc.» This title used to be a bunch of crazy stuff

How is that for a title? :) I use that title, because what I really want to name this post would get me in a lot of trouble with my boss!

I said in my very first post, that I was going to keep this blog candid, open and honest!  I also said I would divulge into the inner workings of our business, and our industry as a whole…  Well here I go… and on to a very touchy subject with some now.  Pre-Buy!  Trust me, I am a man with many words on this right now.

Before I start with my “rant” per se.. Let us take a journey back to mid/late spring..  This was the time when we first heard “rumblings” of pre-buy from our customers.  The oil market started going bonkers, people started getting scared.. so on and so forth.  We kept telling our customers now is not the time you want pre-buy…. but the rumblings kept getting louder and louder.   

So now it is early summer… Prices are higher still… The “rumblings” we are hearing are turning into account cancellations because we haven’t offered our pre-buy yet.  (even though we usually don’t come out with one that early.. and we WANTED to wait this year)  Now when my father and myself hear the words “Account Cancellation”.. we get involved asap!  So, we offered what our customers demanded… pre-buy! 

We sent out our reservation letters (which even those got us in trouble this year, that is another story).. got as many gallons as we thought we needed for pre-buy.. and bammm.. we sent out the offer letters to those who said they were interested.

We sold out in 96 hours… I kid you not…. We literally had a line out both office’s doors that Monday morning.  Personally, I was shell shocked.. I actually couldn’t believe it! I was worried we wouldn’t sell the stuff, thinking to myself….that is a lot of money to shell out in one sum… I was wrong…  We had some customers that we had to turn away (initally ) because we didn’t buy enough product.  (this was the letter I mentioned above… I counted all the gallons that we received from reservation letters, and the final tally was x.5 contracts…. So with the 1/2 we rounded down instead of up… contracts are 42,000 gallons by the way)  So to conclude the preamble to my rant, we had a bunch of happy customers that were all glad they had their pre-buy!  They capped their cost and didn’t have to worry about the winter.

So now we move ahead 3 or so months, to the current.  I can’t begin to tell you the amount of phone calls we have had in the past week about pre-buy….  Customers that want their money back, customers that want us to deliver at retail price and hold off pre-buy, customers that don’t want any fuel, customers calling us scoundrels (and worse)…. you name it…   So needless to say, I am a little peaved, hence the reason for this rant.  What are we to do as your oil supplier?  Do we NOT offer the products and services you expect and demand with your hard earned money? 

For those unfamiliar with how pre-pay works.. It is very simple.. we lock in xxx amount of gallons at a certain price with our suppliers.. and that price is dependant on the market conditions for future contracts at that time.  We then add our normal margin (actually a bit less than normal) and that is how we end up with the customers price per gallon for pre-pay.  It is not really complicated from a pricing perspective.  We then collect the money in advance, customers sign the contracts, and everyone is protected! Customers have their winter fuel at a capped cost!  (which is a valuable commodity by the way) Our suppliers get their money.. we get to pay our employees.. and all is well…. and before I move on, one last thing on this subject… You DO NOT want to do business with an oilheat supplier that doesn’t lock in their gallons in some fashion or another as I have mentioned above.  This is how MANY companies got in trouble last year when the prices went thu the roof. Many companies went belly-up, and took A LOT of their customers money with them! (and most customers had little recourse) We will NEVER allow this to happen to our customers! 

Unfortunately (for pre-buy customers at least), so far this year .. the market price has dropped significantly, and as I type this there is about a $1.50 price difference between pre-buy price and our retail cash price.  There is nothing we can do about this! (without significantly affecting our retail price customers, and that is something we are NOT going to do!)  

I guess what I am trying to say is this…. To our pre-pay customers, I can understand your frustration, I really can… But I hope you can understand the situation we are in.  

To all of our pre-pay customers that haven’t called us “The evil empire” and understand the current market situations and who haven’t tried to “slime-us” in any other fashion… I thank you… I truly do! It is customers like you that make all of us here at Fuel Services come to work everyday….

To all of our pre-pay customers that haven’t been as understanding, or if you are another oilheat suppliers’ customer and are in a similar situation… I hope you can at least understand the situation from the business prospective… and while we certainly can understand your frustration.. there isn’t anything feasible we can do about it.  Understand there is no crystal ball with any financial markets and predicting prices is impossible. (look at Wall Street right now) You can take solace in knowing that you have capped your cost and have a (practically) guaranteed oil supply for the winter.  This is valuable!  Finally, please remember we just try and offer the products and services you ask for, the best we can.

Believe it or not, we are already looking into pricing programs for next year, as I am determined to have more options available to our clients next year!!!!  I am not going to spill any beans, but we are looking into several options to be able to offer our customers next season…some of which may include Caps, downside protections, fixed…  Please keep in mind though, programs such as those have a cost associated with them.  I am sure we will still offer the tradional pre-buy as well for those that absolutely have to have it.  We want to be the leaders in the area with our pricing programs and have the ability to give more options with price protection than a standard pre-buy… So stay tuned….  Enough said from me….

I am figuring I am going to get some response to this blog post!

Till Next Time