Americans and Their Heating Costs: Many Ways to Whittle Them Down

Reuters News Agency has bad news for us. Our winters keep getting more expensive in terms of heating bills. This winter is no exception. This post will provide a few, brief and extremely practical suggestions for how you can beat the un-heat, without depending on Uncle Sam to do it -- at least no directly. Here is the bad news caption from Reuters.

"WASHINGTON (Reuters) - U.S. consumers are expected to pay record prices for heating oil, electricity and propane to warm their homes this winter, and low-income families will need government help to cover those bills, government energy officials said on Tuesday."

To beat back the energy beast, you might consider some of the following information, which few people have seemed to have learned, even though the information is freely available on the internet.

First, if heating oils prices are predicted to skyrocket, they usually do in fact surge. The weather guys now use extremely sophisticated stochastic computer models and other unpronouncable programs to get their forecasts right as closely as possible.

So you can do what businesses do -- hedge. But options or futures contracts through a fairly cheap online broker, and maybe buy a good electrical utility company stock to spread the risk -- diversify your assets. This way when the price of energy shoots up, so do your profits on the contracts you have bought. You can then use the profits to pay your energy bills, and may even have some left over.

Futures contracts now settle at the end of every day, so the risk level is not nearly as high as it used to be. Options are safer still, since the amount of money it is possible to lose amounts to the total paid for the contract and not a penny more. This way, with a little sound investing, you can turn bad news into good news.

If you would like to take a peak at the CBOT futures listings, go here:

http://www.cbot.com/cbot/pub/page/0,3181,949,00.html

At the Chicago Board of Trade Options Exchange (notoriously the CBOE), you can take online tutorials for free to learn how to manage options contracts to your full pecuniary advantage. They have excellent education tools -- all free to you -- and by typing in "top ten options brokers" into your friendly neighborhood google window, you can start yourself off on the right track to locate inexpensive discount brokers of options.

The strategy is fairly simple -- you buy the contract about 6-8 months ahead (that is, you might buy a February (or March), 2008 contract for heating oil in September - October of this year, when it is relatively cheap, and sell it when prices are really high. You will have paid for perhaps three months of high bills out of pocket, only to have these profits fully reimburse you if all goes well. You can also sell options, whose price you believe is likely to fall in order to earn money in the markets. Post-Iraq U.S. oil prices should drop markedly, whenever we actually do pull out. This is predicatable, and many options on different commodities likewise come with cyclical or otherwise fairly predictable results.

Second, If you have the money to invest, you can purchase -- with a surprisingly large chunk of help from government subsidies -- a solar array to heat your home that fits neatly on the roof, and generates more power than you will need, which you then sell back to your local utility company. Thousands of people already do this. It not only lowers the cost of power to you, but the surplus energy sold to your utility will help pay down costs for everyone else. Uncle Sam will pay you handsomely to do this. So for a little up-front expense you can recover later -- it pays for itself in a few years with the subsidy -- your energy ends up being free in the long run.

In California, governor Arnold S. has taken proactive measures to reduce the cost of such a solar unit by as much as one third. Go Arnold. You can read all about it from the news here:

http://soundingcircle.com/newslog2.php/__show_article/_a000195-000982.htm

The price is right. If you combine both these strategies well, you could really get ahead. If you go solar, AND make some money trading heating oil contracts, you could use the profits from the contracts sales to pay down the initial cost of the solar heating unit. Perhaps you might end up getting it for free when the dust settles.

Other ways, more unpopular -- but quite effective -- to temporarily cut your overall energy costs include carpooling with your work peers, taking public transportation (which usually offers a monthly discounted pass for sale) on a temporary basis -- meaning just so long as the energy costs remain unduly high. This is a price-offsetting guerilla tactic; I am not suggesting this as a permanent option. You could also -- if price plausible - move closer to work. This only works in some areas, and in some situations, granted, but it is an opportunity for some.

Here are a few other suggestions I found online to help in this regard.

1. If you use propane or heating oil and have a choice of suppliers, compare prices. Find out if your home-business qualifies for a business discount or business rate.

2. Some utility companies offer free energy evaluations where a certified inspector will come to your home and assess your home and office energy-use. The inspector will show you where you can save resources and money and offer specific suggestions on how to do so. You can locate an energy expert through the Residential Energy Services Network (RESNET).

The Energy Policy Act (2005) allows for tax credits -- reducing your taxes saves money by another means, but the money you save is just as green as if you lowered the cost of your energy consumption. The RESNET website http://www.natresnet.org/ has alll manner of further ways to cut costs and improve your energy efficiency.

3. For a specific weatherization assistance program, try www.eere.energy.gov/weatherization Another information resource is The American Council for an Energy-Efficient Economy.

4. Buying A Home? Consider Energy Ratings and Mortgages. [This is also on the RESNET site].

"Home energy ratings provide a standard measurement of a home’s energy efficiency. Ratings are used for both and new and existing homes. In new homes rating often verify energy performance for the ENERGY STAR homes program, energy efficient mortgages, and energy code compliance. Homeowners who want to upgrade the home’s energy efficiency can use the energy rating to evaluate and pinpoint specific, cost-effective improvements. For existing homes, homeowners can receive a report listing cost-effective options for improving the home’s energy rating. An energy rating allows a homebuyer to easily compare the energy performance of the homes being considered."

The more you put into such efforts, the more likely the more you will get out of them. That is just the way life is. But you would be surprised how much you can save with a moderate extension of real effort in the right direction. Many more resources abound on the internet. Happy hunting (and earning and saving).