How do heating-fuel and snow-removal businesses protect against a warm winter?

The Crux Team · Published October 7, 2026 · Updated October 7, 2026

A warm winter cuts heating-fuel sales and snow-removal work, while you still pay for trucks and payroll. Businesses can use weather derivatives that pay on heating degree days, parametric insurance with a temperature trigger, or event contracts set up by Crux. Snow-removal firms can also sell fixed seasonal contracts, so customers pay the same fee whatever the snowfall. Each option has costs and limits. Doing nothing leaves the whole shortfall with the business.

What are your options?

Option	What it covers	How it pays	What you pay upfront	Main limit
Weather derivatives (such as CME degree-day futures and options)	Heating degree days for one of 13 listed U.S. cities, for a month or a season.	Settles in cash on the degree-day total. A U.S. contract equals $20 times the index.	A premium for options, or a margin deposit for futures, plus fees.	The listed city may not match your area. You buy and manage the contracts yourself through a broker.
Parametric insurance	An agreed temperature, degree-day or snowfall measurement at an agreed place, over agreed dates.	The insurer pays a set amount when an independent measurement meets the trigger. There is no loss adjustment.	An insurance premium.	Not widely available yet. The fixed payout may not match your actual loss.
Event contracts set up by Crux	Weather that can be measured, such as rainfall, snowfall or temperature, over a single day or a full season.	The payout follows the agreed weather measurement. There are no loss adjusters.	An upfront cost. You see it before you approve anything.	Pays on the agreed station and dates, which may not match your actual sales or workload.
Fixed seasonal contracts with customers	Snow-removal revenue. Customers pay an agreed seasonal fee whatever the snowfall.	No payout. Revenue is set before the season, so a light winter does not cut it.	No cost, but in a heavy winter you do more work for the same fee.	Customers may prefer per-push pricing after light winters. It does not help with heating-fuel sales.
Do nothing (absorb the shortfall)	Nothing.	Nothing. The business carries the full drop in sales.	Nothing.	A warm winter falls fully on cash flow, while trucks, payroll and debt payments continue.

What are degree days?

Degree days measure how cold or warm a day was. The U.S. Energy Information Administration (EIA) compares a day’s mean temperature, the high plus the low divided by 2, with 65°F. If the mean is below 65°F, the difference is the day’s heating degree days. If the mean is above 65°F, the difference is the day’s cooling degree days.

EIA gives an example. A day with a high of 33°F and a low of 25°F has a mean of 29°F, which is 36 heating degree days. Add up the days over a winter to measure heating demand for the season. A warm winter has fewer heating degree days than normal.

EIA says a heating degree day measures how much heating is needed to keep a building warm. For heating-fuel sellers, that demand is concentrated in a few months. Star Group, a home heating oil and propane distributor, says in its fiscal 2023 annual report that October to March has historically brought about 80% of its annual volume sold.

What are weather derivatives?

A weather derivative is a contract whose payout follows a weather measurement, such as heating degree days. The main kinds are:

Exchange-listed futures and options. CME Group says it received CFTC approval to list heating and cooling degree-day futures in 1999. It lists them for 13 U.S. cities, and a U.S. contract settles at $20 times the degree-day total, according to its weather markets overview. They are bought and sold through a broker, and futures carry margin requirements, CME Group’s weather page notes.
Exchange event contracts. These pay a fixed amount per contract if an agreed event happens. In one contract that Kalshi filed with the CFTC, the event is monthly new snowfall at a named weather station reaching a set number of inches, as reported by the National Weather Service.
Private contracts. A business agrees terms directly with a counterparty. Star Group’s contracts pay a set amount for each heating degree day of shortfall when the November to March total falls below a threshold tied to the 10-year average, its annual report says.

Some private contracts work both ways. For fiscal 2022 and 2023, Star Group could receive up to $12.5 million a year in a warm winter, but it had to pay up to $5.0 million a year if degree days exceeded the threshold, according to its annual report. Its fiscal 2024 contract had no obligation beyond the initial premium. Check who pays whom in each outcome before you sign.

Parametric insurance does a similar job in the form of an insurance policy. Insurance Business notes that a parametric policy can pay on pre-agreed conditions if an unusually warm winter hurts a retailer’s sales. See parametric insurance vs event contracts.

Has a heating-fuel business used weather protection?

Yes. In its annual report for fiscal 2023, Star Group said temperatures were 16.3% warmer than normal, as reported by NOAA. The November to March period was warmer than the thresholds in its weather hedge contracts. Star Group recorded a $12.5 million benefit under its weather hedge program, and the counterparties paid the amounts in full in April 2023.

The same report adds a warning: there is no assurance that weather hedge contracts will fully or substantially offset the effects of warmer weather. Weather protection can soften a bad season without making up for all of it.

How do seasonal contracts help snow-removal businesses?

A snow-removal business can sell fixed seasonal contracts. The customer pays an agreed fee for the season, whatever the snowfall. Lawn & Landscape reports that one contractor uses the “guaranteed” revenue from fixed contracts to plan seasonal equipment rentals. Another contractor’s rule of thumb is to sign enough fixed contracts to cover most winter overhead.

Fixed contracts move light-winter revenue risk to the customer, while the contractor keeps heavy-winter workload risk. The same report notes that below-average winters can push clients toward per-push contracts, while contractors prefer fixed ones. In a heavy winter, a fixed contract also means more work for the same fee.

Where do event contracts set up by Crux fit?

You tell us what could hurt the business. We set up the protection and show you the terms and price. You approve it through an account in your business’s name that we help you open. Crux arranges exchange-traded contracts. Crux is not an insurer or counterparty.

The weather is measured at an agreed local weather station over agreed dates, such as December to February. Both are set in the terms before you commit. The payout follows the agreed weather measurement. There are no loss adjusters.

Tell us which winter weather hurts your business, and we’ll confirm what we can protect.

A worked example

A warm winter cuts heating-fuel sales. Your winter budget works up to a 40°F average. Above that, protection pays more as temperatures rise.

If December to February averages	Contract payout	What it means
35°F	$0	There is no payout. The $25,000 protection cost still applies.
45°F	$100,000	Helps cover fleet and payroll costs through a season of lower heating-fuel sales.
50°F	$200,000	Helps cover fleet and payroll costs through a much warmer winter.

Protection cost: $25,000 upfront

December to February at your agreed local weather station. Illustrative example. Terms and pricing agreed upfront.

What are the limits?

If the agreed event doesn’t happen, the contract doesn’t pay out, and the upfront cost isn’t returned.
The agreed event may not match your actual loss. A contract pays on the measured outcome, not on your own costs or sales. This gap is called basis risk.
The payout follows the contract terms and the agreed measurement source, such as a published price or a named weather station.
Heating-fuel demand follows temperature, but snow-removal work follows snowfall. Protection on the wrong measurement can miss the loss.
Some private weather contracts work both ways: in a cold winter, the business may owe a payment. Check who pays whom in each outcome.
Exchange-listed degree-day futures cover a set list of cities. The weather where you work can differ from the nearest listed city.

When is Crux not a fit?

Fixed seasonal contracts already cover your winter overhead, so a light winter costs you little.
You want to manage your own positions, and a listed degree-day or snowfall contract for a nearby station fits your exposure.
Your main winter risk is a storm that damages property or equipment. Property insurance is made for that.
Your winter sales vary little from year to year, so cash reserves can absorb the swings.

Related guides

Sources

Degree-days, U.S. Energy Information Administration (EIA), October 2026.
Star Group, L.P. Form 10-K for the fiscal year ended September 30, 2023, U.S. Securities and Exchange Commission (EDGAR), December 6, 2023.
Weather Options Overview, CME Group, November 15, 2016.
Overview of Weather Markets, CME Group, January 12, 2024.
Weather Products, CME Group, October 2026.
KalshiEX LLC: CFTC Regulation 40.2(a) notification for a monthly new-snowfall contract, U.S. Commodity Futures Trading Commission (CFTC), December 1, 2025.
How can parametric insurance help retailers manage financial risks?, Insurance Business, January 29, 2025.
Summer means snow planning, Lawn & Landscape, September 12, 2024.

This guide is general education. It is not an offer, and it is not financial, legal or tax advice. Terms, prices and availability depend on the contract.