15

I found out recently that my oil company is charging me and some of my neighbors almost twice as much as other neighbors for the same type of oil. The difference is per gallon so the amount shouldn't be a factor. Is there any legal recourse we can take or any protections against upselling a utility? Or should we just try to use this information to negotiate a better price next time?

15
  • 13
    Do you have a price contract or are you paying spot market prices? Do they offer contract plans? Mar 31 at 23:45
  • 27
    Bulk discounts are legal. Are the amounts purchased significantly different? Apr 1 at 5:44
  • 6
    From eia.gov/tools/faqs/faq.php?id=169&t=5 "EIA cannot tell you if you are being charged a reasonable or fair price for heating oil or propane. There is no government regulation or control of heating oil or propane prices. If you think you are being charged unfairly by a heating oil or propane supplier, you may contact your local Better Business Bureau and/or your state consumer protection agency, usually administered by the Attorney General." So as long as their not price gouging you specifically during winter months then I doubt they're breaking any laws.
    – MonkeyZeus
    Apr 1 at 19:26
  • 25
    The neighbors getting the low price may also have pre-paid when oil prices were lower. Last July I pre-ordered and paid for almost 2000 gallons of oil when the home heating fuel price was under $2 a gallon. If I called up today to buy oil I'd pay almost $3 a gallon. The oil company uses customer prepayments to buy options to hedge against future price changes and locks in the price for the customer.
    – tbrookside
    Apr 1 at 19:41
  • 5
    Sort of an analogy: We had a local guy (Austin, TX) a few years ago who visited various CVS(?) stores and compared prices. The prices for many things were much higher in his expensive neighborhood than in the poorer parts of town. He thought he had uncovered a great injustice. CVS was artificially inflating prices because the locals were wealthier. It turns out, though, that property prices and taxes and everything are higher in wealthy neighborhoods. It costs more to have a business open there. There might be a reason it costs the company more to deliver your oil...?
    – B. Goddard
    Apr 1 at 20:17
42

In general, a seller may make different and inconsistent sales terms with different customers on whatever basis the seller chooses. In some jurisdictions, for some kinds of transactions, specific laws may regulate this. They may require similar treatment, or advertised prices, or whatever. I do not know of any such laws governing the sale of oil, but there might be some. This will depend on the exact jurisdiction (country, state/province, and perhaps city or other locality). Please edit the question to specify the jurisdiction if you want a more specific answer.

Price discrimination on the basis of membership in a protected class under anti-discrimination laws, such as race or religion under US federal laws, would be illegal. Proving that the basis was unlawful might be hard, however.

0
25

This answer is based on U.S. law.

Unless the oil company is a regulated utility, the answer is yes, it can charge different prices to different people for any reason that doesn't violate a discrimination law (e.g. it can't charge different prices based upon a customer's race).

If it is a regulated utility, it must conform to the applicable price regulations set by the utility regulator.

Most oil companies are not regulated utilities.

10

Note that this is a US-centric answer, and even within the US, the level of regulation of utilities (generally electric, gas, water; and generally excluding things like oil delivery) varies considerably by state. YMMV.

I see this as fundamentally the same as airline pricing. You can have a plane with 100 passengers, each paying a different amount - anywhere from free ("points", etc., just paying the numerous airport/govt. fees) to $1,000 or more (First Class on a long flight) all for essentially the same transport of 1 human from point A to point B. Even the variation between classes is insignificant - a frequent flyer who buys a ticket well in advance uses and uses points to upgrade to Business Class could be paying far less than a last-minute Coach passenger and yet get a bigger seat and other amenities.

The only difference with an airline flight is that you know up front, when you buy the ticket, what you will be paying. With oil (utilities in general), while you likely have the information "somewhere", you typically don't see exactly what you will pay until after the delivery: For oil, based on both unit cost and quantity delivered; for electricity or natural gas, based on unit cost and quantity consumed over a period of time (typically a month).

Unit cost can vary based on:

  • Bulk purchases - e.g., minimum quantity per delivery or based on average usage over the past year
  • Contract pricing - agree to buy from the same company for a year (or 2 or 3) and get a guaranteed price
  • Regulatory - this is particularly the case with monopoly situations - most places have a single physical transport for electricity (and for natural gas and for water), so government will often step in either to mandate a particular price or to restrict the pricing based upon the supplier's actual costs. This can result in individual homeowners paying far more or far less than the market rate.

Oil is a little different from electricity or natural gas or water, as the consumer can choose (in most places) from many different suppliers who will come in with their own trucks to fill your tank. Essentially the same as filling your car with gas. However, when you fill your car with gas, you can shop around for the gas station in your area that has the best price on any given day. With oil deliveries, pricing is not as clear - most people aren't going to call 5 suppliers on the day they need oil to find out who has the best deal.

6
  • 1
    I am confused. In the country in which I live (Germany), I know even for utilities exactly what I will pay. And if the company wants to change the price then they have to tell us weeks before and I can always cancel the contract when the price is rising. It, of course, still depends a bit on how many units were delivered but that is under my control. I wonder how the market works when you do not know upfront and then you suddenly get an invoice twice as high as your neighbours? Apr 2 at 7:27
  • 1
    In the UK (and many other countries) oil is no different from electricity, gas, or water, because each consumer can choose between a large number of suppliers each offering different contracts (There are currently more than 50 electricity supply companies, and the same number for gas, in the UK). They all use the same distribution network (i.e. the same wires and pipes) but the distribution and supply are independent business operations. In fact, there are even large French and German electricity supply companies with many customers in the UK.
    – alephzero
    Apr 2 at 14:18
  • @alephzero: That's also true of the electricity markets in parts of the USA (For example Texas)
    – Ben Voigt
    Apr 2 at 16:48
  • I don’t understand your reference to points as “free.” Airlines recognize points as a current liability- unearned revenue. In what way is a flight using points any more free than a purchase on a gift card?
    – Pisco
    Apr 3 at 17:07
  • 1
    @Pisco You're correct, but the actual "price" in dollars changes. Since the original question is why the actual specific price of something might be different, this is a good analogy.
    – fectin
    Apr 3 at 17:26
2

If you live in a free (non-regulated) market, that is perfectly legal and you should be quickly look for another supplier.

This is very common for consumer utilities (electricity, gas, phone.... oil????) where companies make a lot of profit on old out-of-date contracts.

I'll speak Euros for examples.

Electricity example: suppose you pay 0.05€/kWh. Next year, the raw material's price drops. The company then issues a promotion for new customers only with price 0.02€/kWh. Your contract of 0.05 is still valid forever. I'd also add that, in case the price increases, the power co has a clause that allows them to raise the price to 0.07 with option to cease the contract.

Mobile phone example: very famous example. You subscribed years ago for a plan with 5GB/month for 20€/month. But today I could find a 100GB/month 10€/month plan. You'll pay the 20 until you change provider.

Conclusion

Check if you can access an online price comparator in your national market. I use them regularly for my home utilities.

-2

Remodeling, driveway and lawn maintenance contractors base their prices at least in part on their perception of the customer's ability to pay. An oil contractor can play by the same rules unless granted some sort of legal monopoly for that area (regulated) or subsidized in some way by public funds. As long as fraud or breach of contract is not involved, your best bet is to shop around (or bake the driver some cookies)to get the best price.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.