Wild heating oil prices foreseen this year

Posted

Sunday December 18, 2011

Veteran Berkshire County heating oil dealers insist there’s no way to predict where this season’s wildly swinging prices are headed.

The average dropped below $3.60 a gallon on Friday following a slowdown in demand caused by recent milder temperatures and a production boost by oil-rich Mideast nations that belong to OPEC.

"The market is very volatile now," said Jeff Clifford, the fifth-generation owner of Clifford Oil Co. in Lenox, founded in 1875 as a coal supplier. He serves about 3,000 oil and 2,000 propane customers in most of central and south Berkshire.

Noting that prices dropped 10 cents a gallon since Wednesday at the New York Mercantile Exchange, he recalled peak oil prices at $4.50 a gallon in 2008.

"Traditionally, prices have been driven by supply and demand," he said, "but nowaways it’s speculators, hedge funds, institituons and banks betting on commodities.

"People with money have been driving up prices and cashing in at the expense of poor people who bear the brunt of it," he maintained. "Š It’s the rampant speculation that has driven prices up."

While some of his customers have been struggling to pay their bills, Clifford said, the relatively mild weather so far has given people a much-needed break.

Some homeowners are considering a switch to natural gas where available, because of significantly lower prices over the past two years. High conversion costs remain a major obstacle, said Dennis Koch, general manager for Lipton Energy in Pittsfield, which serves about 1,800 customers from Adams to the Connecticut border.

An estimated 40 to 50 percent of Berkshire homeowners heat with oil, he noted.

But Koch said he’s not seeing "hordes of people" stampeding toward natural gas.

"Some people have done it because of incentives on new equipment, but it’s quite pricey, considering the cost of converting and getting rid of your oil tank," he said. "The payback is not quite there."

Over the past decade, he said, oil was a better deal for the first eight years, but in the past two, natural gas has won out.

Among oil-heat users considering a switchover is Nancy Decelles of Pittsfield, who’s keeping her thermostat at 64 while looking into conversion costs and availability.

"Our pellet stove helps out," she said.

For Denny Whitcomb of Lenox, oil is "too darn expensive." He’s heating a "big old Victorian with no insulation" and is paying more than $5,000 per season.

Koch’s advice to cash-strapped customers: "Control consumption, upgrade equipment, keep it clean and be patient."

Oil distributors don’t benefit from higher prices, he emphasized; the 12-cents a gallon profit margin remains the same while expenses go up.

According to Louis Sweatland, owner of Sweatland Payless Oil in Pittsfield, serving customers from Sheffield to Adams, "this year, it has been a revolving door of volatility coming from many different directions."

He cited dramatic growth in demand from Asia, especially China, and Latin America, especially Brazil, as well as supply disruptions from Libya, now easing,

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He agreed that while speculators "have played a huge role in the past few years," many have dropped out recently, moving on to other commodities.

"Prices seem to be stable now, even heading down a bit," he observed, adding that volatility on the downside is beneficial for customers.

In North Adams, the family-operated West Oil Co. reports more customers are switching to natural gas.

"A lot of customers are out of work, struggling to pay for one load," said Ann West, co-owner of the company founded in 1949. "We work with them as best as we can, offering a minimum 125-gallon delivery."

"We feel squeezed too," she added. "We’re all struggling to get by. The margins aren’t there with prices being so high and we try to stay very competitive. People are finding it hard to pay bills, but everyone has bills, including us."

Low-income families who depend on the LIHEAP fuel-assistance program are out in the cold this winter.

As many as 10,000 people are expected to apply for aid, according to the Berkshire Community Action Council, but this season’s grants from $380 to $650 per household for the entire winter are down from $800 last year.

The $1 trillion spending bill passed by Congress Friday for 2012 slashes low-income energy assistance to $3.5 billion nationwide, a 25 percent cut from this past year.

To reach Clarence Fanto:

cfanto@berkshireeagle.com
or (413) 496-6247.

Sample prices

Here’s a sampling of heating oil prices, per gallon, as of Friday afternoon:

Lipton Energy, Pittsfield $3.589

O’Connell Oil, Pittsfield $3.599

Sweatland Payless, Pittsfield $3.649

Berkshire Fuel, Pittsfield $3.45 (requires $24.95 annual fee)

Clifford Oil, Lenox $3.53

Brown Oil, Dalton $3.59

Whiting Energy Fuels Inc., Dalton $3.639

West Oil Co., North Adams $3.599

Sources: Newenglandoil.com, individual dealers.


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