Demo: A revolution in home utilities, NeighborOil promises lower prices through group buying power

Oil is more than just gasoline. For many people, it’s also how they heat their homes.

NeighborOil is a startup that’s reexamining how communities buy oil for heating, and helping consumers negotiate for better prices and better service. Starting today, it’s bringing its revolutionary model to a wide range of residential utilities, including electricity and natural gas.

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“Have you ever seen people who work their tail off and cannot make ends meet?” asked NeighborOil founder Paul Harkins in a recent interview. “On top of it, they are too proud to ask for help. We set out to create a way for people to pay for the things they must buy without having to ask for help. If you use oil to heat your home and you do not or cannot buy oil, you freeze. No one should ever have to look at their child who is cold because they do not have heat and feel like a failure. NeighborOil will eradicate that from this country.”

First, the company negotiates the lowest possible rate for oil in a given geographic area. The company then sells oil to local residents. Oil prices can vary based on region and the amount of oil needed. Additional oil offers may be applicable for a set quantity of oil in an area; once they’re sold out, the offer is over.

Residents can also track oil usage, payments and other data through a NeighborOil web-based dashboard. By using the website, buying oil and engaging with their neighbors, they can also earn on-site points, which lower that user’s oil price.

Here’s a video demonstrating how NeighborOil works:

Home heating oil (HHO) makes up around 25 percent of the yield of a barrel of crude oil. In other words, HHO represents the second largest part of crude oil usage, and it’s second only to gasoline. With HHO being used in residential and commercial areas all around the U.S., Canada and the UK, the market for HHO is vast. Harkins estimates that around 25 million Americans use oil to heat their homes. Altogether, the market for home heating oil comes to $32 billion.

“We have all sorts of people using our product,” said Harkins. “We have people who cannot afford oil to people who can buy but want to play the game of seeing how low they can get the price of oil.” He went on to mention a particular customer who joined NeighborOil in mid-July, bought her oil in late July and saved nearly 50 percent on her purchase with the points she had earned.

Another customer in Massachusetts had only $50 to spend and needed 20 gallons of oil. The woman already had no hot water. “We got her 150 gallons in three days,” said Harkin. “There are so many people using our product to finally have control of what they pay to heat their home.”

One unique factor with NeighborOil is that, unlike the competing 20,000 local distribution services, this startup allows consumers to pay online with a credit card. More traditional companies require cash or check on delivery.

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In addition, NeighborOil will expand its service so consumers can use the site to pay for all their local service and utility bills, including natural gas, electricity and more. “Can you imagine getting your electric bill and calling the electric company and saying, ‘Tell you what, this $100 bill you sent me, how about I send you $50 and refer three friends, then we call it even?'” said Harkins. “That would never happen in the real world. But it is happening now with NeighborOil in the oil world, and it will spread to all services that must be paid for.”

Currently, the company is seeking more team members and is continuing to grow. NeighborOil is also looking for more partners that will allow members to earn points and redeem them for local services. At DEMO, the company is launching a retail platform that allows members to earn points for each dollar they spend with major retailers. Those points can then be used to buy oil on the site.

NeighborOil is bootstrapped to date and is currently raising its first institutional round of funding. Here’s our interview with the company’s CEO at DEMO:

NeighborOil is one of 80 companies chosen by VentureBeat to launch at the DEMO Fall 2011 event taking place this week in Silicon Valley. After our selection, the companies pay a fee to present. Our coverage of them remains objective.

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Image courtesy of cafemama.