You may have noticed throughout the past few years that the cost of a service policy has gone up significantly. In the summer of 2013, Mass Energy looked around to see what was happening in the industry, and found that there had been a 19% increase* in the average renewal price for service contracts over the last 5 years[1]. Why?
Before 2008, when wholesale heating oil prices were at $1.00 - $2.00, dealers’ profit margins (as a percentage of their sales) were adequate to help carry the business. Dealers often made small profits or lost money on service. Since 2008, when wholesale prices began a steady climb toward the $3.00 per gallon mark dealers have been looking at their entire operation to see where they could raise their bottom lines while keeping their heating oil prices as low as possible. Furthermore, the rising cost of health insurance increased faster than the general rate of inflation and it has heavily impacted labor costs, which affects service pricing. This has contributed to the increased cost of service policies.
How long will this last? We’ve already seen this trend begin to peak, and these price increases slow or even stop as dealers try to distinguish themselves from their competition. Hopefully the future includes steadier prices. Furthermore, we encourage our members to make heating system maintenance a high priority. We obviously do not want you go without heat on a cold night and it’s a fact that well-maintained systems use less oil. So when oil costs well above $3.00 per gallon, please don’t skip the service.
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