Written on: August 1, 2026 by Phillip J. Baratz
After more than three decades in this industry, I’ve noticed one thing has never changed: customers don’t remember the years when prices behaved—they remember the years when prices went crazy. They remember the Winter when their bill doubled in a matter of months. They remember the year they heard a neighbor say, “My dealer capped my price. I’m glad I switched.”
That’s why how you price—not just what you charge—matters more than ever.
The Three Main Pricing Paths
Most dealers lean on some combination of variable, fixed and capped pricing. Each has a place, and each has real risks.
1. Variable Price: With variable pricing, the customer pays whatever the market is on the day of delivery. The upside is that when prices fall, customers feel it quickly. They see you as “fair” and “market-based.” The downside, however, is that when prices increase sharply, customers feel every penny—and tend to blame the dealer and not the market. In calm markets, variable pricing feels simple and honest. In volatile markets, it can crush margins, overwhelm phone lines and drive customers to shop around.
2. Fixed Price: With a fixed price, dealers lock in a number for the season and (if properly hedged) your financial risk is controlled. While this seems simple, it can also be emotionally risky. A fixed price is easy to explain, easy to budget, and the dealer is a hero if the market rises. On the flip side, when prices fall, the dealer is suddenly “too expensive.” Customers might compare what price they are paying versus what their neighbor is paying, and accusations of price-gouging are not uncommon. Fixed price protects a company’s profit and loss when hedged well, but it can hurt trust and loyalty when the market breaks lower.
3. Price Caps: Price caps are the only structure that protect against rising prices, and allow the customer to benefit when prices fall. They solve the emotional problem of customers wanting protection if things go crazy, but not wanting to feel foolish if prices drop. The challenge, of course, is that caps are more complex and more expensive to put on properly.
Why Caps Feel Harder Right Now
After this past Winter, the same concerns keep coming up in conversations:
These are very human reactions. When volatility is fresh in everyone’s mind, the “insurance” that a cap represents feels painfully expensive. It’s like trying to buy homeowners insurance the week after a flood.
A few realities dealers are wrestling with:
There is a risk here that is larger than the option premium, and it is easy to underestimate that risk when a dealer is tired from a wild Winter.
The Real Risk is Not Offering Caps at All
The biggest threat is not that a cap program is expensive to hedge this year, it’s what happens if customers want a cap and businesses don’t offer one. Here’s what happens in those years:
1. Your best customers go shopping. They don’t want to play the market. They want protection. If you won’t give it to them, they will find someone who will.
2. You concede your value story to competitors. The competitor who offers a cap gets to say, “We care about your peace of mind and we’re willing to structure protection for you.” That is a powerful message.
3. You lose high-value, low-maintenance accounts. The customers who proactively choose caps tend to be planners. When they leave, you often keep the ones who call at the last minute and complain the loudest.
4. You train the market to think of you as “just another variable price dealer.” Once that perception sets in, it is hard to reposition yourself as a partner who proactively manages risk for your customers.
In other words, the cost of not offering caps can be measured not only in basis points and premiums, but in lost relationships, lost gallons and lost reputation.
Acknowledging the Hard Part
It is important to be honest: Caps are harder than simple fixed or variable programs to execute well. Dealers must think about volatility, basis, RINs and storage. They must treat the premium like insurance and explain it to customers clearly. Fuel companies also need a well-designed hedging and supply strategy behind the scenes.
However, “harder” is not the same as “optional.” For many dealers, caps are where the long-term loyalty is built:
If you think about the dealers who came through past price spikes with their reputations strongest, a common thread is that they had cap programs and communicated them well.
Why Not Offering Caps is the Worst Option
If a dealer only offers variable and fixed rates, they expose customers to the full pain of the market on the variable side, or they expose themselves to customer frustration and attrition on the fixed side when markets fall.
A well-structured cap does three things no other program can do together:
1. It protects your customers from the upside spike.
2. It allows them to benefit if the market weakens.
3. It signals that you are actively managing risk on their behalf.
That third point is crucial. Dealers are not just selling gallons; they are selling stability and trust. A cap, even with a visible premium, says, “We know the world is volatile. We have tools to protect you. Here’s how we’re using them.”
In that light, not offering a cap becomes the riskiest choice. It saves you the effort and premium today, but it may cost you your best customers tomorrow.
How to Talk about Caps with Customers
There are a few practical themes that resonate with homeowners and commercial accounts:
The goal is not to “win” against the market; it is to avoid being hurt by its worst behavior.
Closing Thought: Now More Than Ever
The last few years have reminded everyone that “normal” markets can disappear overnight. Customers have long memories when it comes to feeling unprotected or misled. They have equally long memories when someone steps up and structures protection for them in the middle of chaos.
Price caps are not perfect. They are not free. They are not simple. However, in a world where volatility is the rule, not the exception, choosing not to offer caps may be the most expensive decision a dealer can make.
Customers want the option to protect themselves. Many need it to feel comfortable staying with you. If they cannot get it from you, they will look for it somewhere else. Now more than ever, that’s a risk not worth taking. ICM
