Every business approaches fuel purchasing a little differently, but most goals fall into one of three categories. Some businesses want to lock in a fixed price at a future date for budget certainty. Some want to lock in a price while keeping downside protection if the market dips. Others want to lock in supply now and figure out price later, or simply pay market price when the time comes. In all three cases, the common thread is the same: a secured supply agreement between you and your supplier. Sprague offers a variety of oil and gas forward contracts built around wholesale fuel purchasing, giving you a program to meet each of these needs.
This post walks through each one in plain language, so you can see which programs fit how you buy and sell. Be sure to watch each program’s video walk-through as well.
What Makes Up The Price of Your Product
Before we dive into the contracts, it’s helpful to know what all goes into making up the price of your product. Every fuel price has at least two parts: the base commodity price and a differential (sometimes called basis or basis differential). The differential is the amount added to the base commodity price to cover things like transportation and handling costs. A differential may also account for shrink, the natural expansion or contraction of fuel from its paid-for gallon size—though some contracts deal with this separately.
Some programs also add a premium on top for downside price protection. That premium stands outside the differential, it is a separate cost tied to the protection itself.
For contract programs, the base commodity price comes from the futures market, not from what product costs today. The market trades predominantly in futures, with each proceeding month have a projected cost by product type. That futures price, the current trading price for the month or duration of months desired for your contract, is what informs the base price built into your contract.
Fixed Forwards: Set Price for Budget Certainty
How it works: A Fixed Forward locks in one price for a set volume of diesel, heating oil, or kerosene gallons over a defined delivery period. The period runs from the 10th of one month to the 9th of the following month, rather than a standard calendar month. Your price and your gallons are set before the period begins. Fixed Forwards also require a 1,000-gallon minimum.
Advantage: You know your cost and your supply ahead of time. There is no guesswork on either side. This makes budgeting and customer pricing straightforward for the period you lock in.
Considerations: A Fixed Forward is a good fit if you like today’s price for a future month and you are comfortable knowing the market could move up or down after you lock in. If you sell a fixed-price contract to your own customers, you can use this contract type to inform your price ahead of time, putting you in control of your margin.
Ideal for: Companies buying wholesale fuel who want secured supply and a locked in price.
HeatCurve®: A Fixed Forward Built for the Heating Season
How it works: A HeatCurve is essentially a Fixed Forward program designed for heating oil and kerosene. Instead of manually setting a volume for each month, you enter one total gallon amount and select a heating strip. From there, Sprague’s system automatically calculates how much you’ll need each month and gives you one weighted price across the entire strip. Contracts start at 1,000 gallons and can be customized in 100-gallon increments. You choose from 12 distribution schedules built to match your expected heating demand, and the monthly split is calculated using decades of weather and supply data.
Advantage: You get a predictable price on heating oil across the entire spread, backed by a wet gallon supply agreement. Decades of weather and supply data shape your gallon distribution automatically, weighted toward peak months and lighter in the shoulder months, so you’re not left guessing how much you’ll need each month.
Considerations: This program is perfect for those who sell fixed-price heating contracts. As you sell, check our HeatCurve price to inform the price you give to your customer, then lock in the gallons with Sprague. This secures your gallons and price, and your margin stays protected.
Keep in mind the price is a weighted average, so you may pay more than the daily market price sometimes, and less at other times HeatCurve requires 1,000 gallons across the entire strip, with volume in any given month dictated by the weighting of your chosen schedule.
Ideal for: Fuel marketers who want to align heating oil forward purchases with seasonal customer demand.
PriceFlex®: Downside Protection With Every Lift
How it works: PriceFlex is like a Fixed Forward in that it locks in a price for your diesel, heating oil, or kerosene supply over a defined delivery period. Unlike a Fixed Forward, though, a PriceFlex contract has built in downside protection. Because that protection has to be priced in, a PriceFlex contract carries a premium on top of your base commodity price and differential. You lock in a maximum price, but you can also benefit if the market dips below your cap price.
Advantage: You get a ceiling on your cost, so a price spike cannot push you above the maximum you agreed to. At the same time, you are not locked out of a lower price on any given lift. PriceFlex also includes built-in basis protection, which helps reduce basis risk while keeping your pricing consistent. Pay your per-gallon premium up front or finance it and pay as you lift through the heating season.
Considerations: Protection is available as At-the-Money (ATM) or Out-of-the-Money (OTM), and it is aligned with your lifting schedule. With ATM, you pay a slightly higher premium through the length of your contract, but you can lift at a lower price as soon as the market moves below your base price. With OTM, you pay a lower premium, but the market must dip even lower before a better price unlocks.
PriceFlex requires a 10,000-gallon minimum contract, with a 2,500-gallon monthly minimum.
Ideal for: Fuel resellers who want price protection while keeping the opportunity to benefit from lower market prices.
PhysicalCap®: Get Downside Protection on Heating Oil
How it works: PhysicalCap is like a HeatCurve in that you give us your total gallons needed across a heating strip and we will automatically calculate how much heating oil or kerosene you will need for each month. Unlike a HeatCurve, though, a PhysicalCap contract has built in downside protection. Because that protection has to be priced in, a PhysicalCap contract carries a premium on top of your base commodity price and differential. You select your schedule and contract volume, then establish a maximum cap price using a fixed base price and differential. Each time you lift heating oil or kerosene, Sprague’s system calculates whether you pay your cap price or a lower price, based on where the market stands the previous day.
Advantage: You get lift-for-lift price protection that lines up with your own delivery schedule, so your upstream cost is protected against a spike. At the same time, you are never locked out of a lower price. If the market is down when you lift, you may pay less than your cap. Pay your per-gallon premium up front or finance it and pay as you lift through the heating season.
Considerations: PhysicalCap requires a 10,000-gallon minimum for the full contract. Volume in any given month is dictated by the weighting of your HeatCurve schedule, not a separate monthly minimum.
Ideal for: Retailers offering customer cap programs who want to reduce pricing risk without giving up market opportunity.
Unpriced Guaranteed Differentials (UGD): Secure Your Basis Today, Lock In Your Price Later
How it works: A UGD is similar to a Fixed Forward, where you lock in your diesel, heating oil, or kerosene supply and differential for a future date. But unlike a Fixed Forward, you do not need to immediately lock your base price. You can monitor market conditions and convert your contract to a fixed price before lifting your gallons. UGD contracts are available in 42,000-gallon increments.
Advantage: A UGD lets you secure your gallons for a future date while locking in your total price later. If you want to see where the market moves before you commit, this is a strong option. Your supply and your differential are locked in right away, so you are protected against regional basis spikes.
Considerations: You must set your price before you can start lifting. Today’s price might be high or low, and only time will tell which way the market moves from here, so you are making a judgment call on where you think price is headed. Sprague can help talk through that decision with you, but waiting to land on a price is not without significant risk. Stay engaged and be ready to make the call before your start date arrives.
Ideal for: Buyers who want to secure their supply and differential now while waiting for the right time to lock in the market price.
Index-Based Pricing: Stay With the Market
How it works: Index-Based Pricing lets your diesel, heating oil, kerosene, or gasoline price move daily with the Argus New York Harbor benchmark, while your differential stays fixed. You contract at a fixed differential, then pay that differential plus the prior day’s Argus settle price for every gallon you lift that day. That means your product cost changes day to day. Monthly contract volumes are established at the start of the agreement, and ratable monthly lifting is required. Shrink calculations apply at most terminals and may vary by product.
Advantage: Your total price is based on an independent, third-party benchmark used across the industry, so your pricing is transparent and easy to verify. Your differential is locked, and your supply is secured through reliable, scheduled monthly volumes.
Considerations: Since Sprague’s rack price is not based solely on the prior day’s close, your index price can land below or above rack on any given day. Index-Based Pricing also requires a large gallon commitment. For both reasons, we recommend this program for buyers who know they will need the gallons regardless of what the market does and who can absorb day-to-day price volatility.
Ideal for: Customers who need guaranteed supply and can tolerate pricing that follows the market.
Which Program Fits You
| Lock in a known price and wet gallon supply | Fixed Forwards |
| Secure supply and a fixed price for known seasonal demand | HeatCurve® |
| Offer customer cap programs and benefit from lower markets | PhysicalCap® |
| Want to lock in a cap, but still benefit from down markets | PriceFlex® |
| Lock in your differential now and secure a price later | Unpriced Guaranteed Differential (UGD) |
| Secure supply and a fixed differential now and buy at daily market prices | Index-Based Pricing |
Getting Started
All of Sprague’s wholesale fuel pricing programs require credit approval. Your Sprague rep and the contract desk are the best starting point for that process and for any questions on which program fits your business. Reach out today to talk through which program fits your business.
