Heating oil prices take a costly jump 'It's really been dramatic'

February 28, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

The cold is coming back. But shop around before you call the oil truck.

While natural-gas prices have stayed relatively steady, a supply squeeze has boosted the wholesale price of heating oil by almost 30 percent since January. The pinch's effect on retail fuel-oil prices, however, varies sharply by supplier.

Dealers who secured adequate stocks at pre-February prices are in a better position to sell cheaply than those who ran short and are scrambling for product now, industry analysts said.

"The guy who has inventory probably wants to get rid of it," since winter is almost over, said James L. Van Alen, an oil analyst for Janey Montgomery Scott in Philadelphia. "The guy who doesn't is going to have to go out and buy it from someone else."

Calls to a half-dozen dealers found heating oil selling for 96.9 cents to 121.9 cents a gallon. That's a difference of $25 for 100 gallons. About a fifth of the Baltimore area's homes are warmed by oil.

"Our price has been fluctuating," said Debi Avaritt of Beebe Fuel Oil Co., which yesterday was charging $1.09.9 a gallon for purchases of at least 125 gallons. "We are trying to maintain it as much as possible, but they've been raising it. It's really been dramatic in the last couple of weeks."

On Jan. 25, fuel oil for March delivery could be had wholesale for as little as 49.8 cents a gallon. Then it got cold again. Heaters burned overtime. Energy sales boomed. Yesterday heating oil for March delivery closed at 64.3 cents per gallon -- the highest price in more than three years.

Even before this month's cold snap arrived, the industry had been keeping lower supplies to save on inventory costs.

"The heating oil that's being used, about 85 percent of it is being refined on a daily basis," said Joe Lastelich, spokesman for the American Petroleum Institute. "It's not all refined and put into a tank and wait for winter. People who are in this business are very careful about how they manage their stock."

This winter's frigid whether siphoned the stocks even lower. East Coast supplies of heating oil, diesel and similar fuels are 30 percent lower than they were last year, according to the American Petroleum Institute.

Now dealers are hurrying to replenish while there's still some winter left -- and driving up wholesale prices. Predictions of more cold weather for the East Coast this weekend haven't helped.

Nobody expects the price spike to last. Wholesale fuel oil for April delivery, when the weather presumably will warm up and demand will drop, is nearly 10 cents a gallon less than the March contract.

"The price has come up in the last month, month and a half," said Doug Phelps, vice president with Carroll Independent Fuel Co. "But more than likely it looks like a temporary thing."

Rates for Baltimore Gas and Electric Co., the area's main power utility, haven't been affected by the heating-oil increase, said spokesman Arthur J. Slusark. BGE generates only 1.4 percent of its electricity from oil, he said, and that's mainly in the summer, when it's less expensive.

Wholesale natural-gas prices have risen this season, but the customer's retail price is smoothed out by an averaging formula, Mr. Slusark said. Prices for coal, which generates 57 percent of BGE's electricity, have been lower in recent years.

BGE customers will have used about 8.3 percent more gas from November to the end of February than they did the previous winter, Mr. Slusark said.

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