Sticker shock awaits those who heat homes with oil

Cost per gallon nearly doubled in four years

The Cost Of Energy

August 19, 2005|By Laura Barnhardt | Laura Barnhardt,SUN STAFF

Patricia Bentz is paying big money, already, to stay warm this winter.

Her most recent bill to fill the oil tank that heats her Monkton home and provides hot water: $1,000.

"There's nothing I can do about it," she said.

Across the region, people have been watching the price of gasoline creep up nearly every time they pass a service station. But many are only now receiving their first shipments of heating oil for the coming winter.

"There's going to be sticker shock," said Ray Henry, a managing member of Husky Heating, an Ellicott City-based fuel company.

And there is little hope for relief with crude oil prices in record territory. The U.S. Department of Energy predicts that the cost of home heating oil this winter will be almost 16 percent higher than the year before -- and nearly double that of four years ago.

Sunny summer days might not seem like the time to think about turning on the heat. But August is when many homeowners compare prices, fill up for the colder weather to come and choose their payment options. Some consumers, fearing further increases, are trying to lock in a price at the current level. The Energy Department projects that the average heating oil price for this month will be $2.13 a gallon.

"I hear a lot of complaints," Bradley Roberts, a deliveryman for Westminster-based Tevis Oil, said this week as he left a bill for $300 on a door at a Stoneleigh home. "But there's really not much we can do."

As she picked up the bill, Shannon Fisher said, "It seems like an awful lot to me."

Most fuel companies offer budget plans that enable customers to pay for the oil each month, rather than the several times a year when it is delivered. Oil customers and the companies that supply fuel also have the option of locking in a price.

Basically, the fuel companies purchase "insurance" to guarantee a set price. If the price drops, buyers get the insurance back, said Pete Horrigan, president of the Mid-Atlantic Petroleum Distributors Association.

He said most fuel dealers are hedging their bets by filling up some of their reserve tanks at the current -- albeit high -- prices, and by locking in guaranteed prices.

"No one in the business is waiting for cool weather to hit and then running out and buying," Horrigan said.

Glenna Kinney, the distillate and propane general manager at Tevis Oil, says she expects more customers to opt for budget or price protection plans.

"The news and the price of gas has made them aware of the craziness," she said. "But we're also talking to our customers about conservation -- having their furnaces tuned up, installing better insulation. It's extremely important in these times."

The company also offers a lower-sulfur fuel that is less expensive and might be more appealing than ever, Kinney said.

Henry, of Husky Heating, said he is not sure why prices have soared.

"There's product everywhere," he said. "I think it's a combination of factors, including that there are fewer major oil companies -- not a lot of competition. They're dictating the prices."

He recommends that customers consider buying more efficient furnaces. "That can save people a ton of money over the short term," he said.

But "there's only so much people can do," he said. "You can't change your commute, the car you have, the house you have, immediately."

Tyson Slocum, research director for Ralph Nader's Public Citizen's Energy Program, says that while all consumers can expect higher heating bills this winter, oil customers face the largest price spikes in the months to come.

"Because oil use is geographically concentrated in the Northeast, it's a smaller market that is more captive," he said.

Even the organization's co-op, Buyers Up, which acts as an agent to negotiate oil prices for its members, hasn't been able to help much.

"We're limited because we have to buy from the suppliers," Slocum said.

Utilities are also warning customers that their bills will be high this winter, says Chris McGill of the American Gas Association, which represents natural gas retailers.

Wholesale prices for natural gas are climbing along with those for crude oil and gasoline.

The U.S. Energy Information Administration estimates that natural gas could cost consumers more than $13 per thousand cubic feet in December, an increase of more than $2 over the price at that time last year.

The cost of electricity during the coming cold months is projected to be roughly the same as last year, about 8.7 cents per kilowatt hour, according to Energy Administration figures.

Comparing energy sources for heating isn't simple, said Jonathan Cogan, an energy information specialist at the administration. So much of heating costs depend on the efficiency of the heating system and how much competition exists among energy suppliers in the area.

"You have to look locally at prices and factor in the cost of a new heating system," said Cogan, adding that the agency offers an energy cost calculator for consumers at www.eia.doe. gov/neic/experts/heatcalc.xls.

Jesse Kendall, a Hampden homeowner, said he's considered switching to a natural gas-fueled furnace.

"I figure it has to be at least a little bit cheaper," he said.

Kendall said he hasn't had to fill his oil tank yet for the cooler months to come. But looking at gasoline prices, he said, "I assume it's going to be a lot more expensive."

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