Lebanon
That’s the consensus among regional heating oil and propane distributors, who say that a host of factors — from the brutally cold temperatures of last winter to growing fear of a military confrontation with Iran — is driving up the cost of oil in global trading markets, which sets the price for home fuels.
“Realistically on heating oil it’s roughly a 20 percent increase this year from the prior year,” said Casey Cota, president of Cota & Cota, a leading home heating fuel supplier in the Connecticut River Valley that has a service office in White River Junction. “Propane is up about 25 percent.”
For low-income households that look to financial help to get through the winter, that could be particularly harsh given that federal appropriations to the states for fuel assistance programs are not expected to rise in the coming fiscal year, which begins Oct. 1.
“It’s looking like fuel oil will be more expensive this year, and that will impact purchasing power,” said Sean Brown, deputy commissioner of the Vermont Department for Children and Families, which administers the fuel assistance program in the state.
During the peak of last winter in Vermont, from December through February, the price of fuel oil ranged from $2.65 to $2.87 per gallon and $2.76 to $2.95 per gallon for propane, according to the state’s Department of Public Service.
Prices averaged higher in New Hampshire.
During the same three-month period, the price of fuel oil in New Hampshire ranged from $2.69 to $3.01 per gallon for heating oil and $3.35 to $3.54 per gallon for propane, the U.S. Energy Information Administration reported.
The price of home heating fuels fluctuates wildly and is influenced by causes ranging from the weather to the economy and geopolitics. Generally, crude prices were higher in 2014 and then sloped downward to a trough in early 2016 before slowly moving upward through the year and seesawing in 2017.
Fuel oil distributors typically begin offering their “locked in” contracts with new rates during the summer so that households can insulate themselves from price shocks and supply demands.
Over the years, distributors — who have no hesitancy to open up service storefronts nearly next door to each other in a scramble for customers — have refined their purchase plans to offer a welter of options. The most popular now tend to be those that lock in a customer’s price on a contract for the coming season and the long-standard pay-on-delivery option without a contract.
And when it comes to estimating where heating fuel costs will likely be heading in the coming months, home fuel industry veterans offer a simple bit of advice: Follow the oil.
Dana Jones, marketing manager at White Mountain Oil in North Conway, N.H., and past chairman of the Energy Marketers Association of New Hampshire, the state’s trade association of home fuel dealers, noted that the price of Brent crude oil, to which heating fuel prices are linked, has risen from around $50 a barrel a year ago to $60 to $70 a barrel this summer.
“The cost of crude trickles down” to the cost of home heating fuels, he said.
This year’s higher cost of crude oil is reflected in the locked-in contract price regional heating oil and propane distributors have been setting in recent weeks for the coming winter. Those contract prices can, and often do, vary throughout northern New England, just as gas prices vary from one part of the state to the next.
In Woodstock, for example, Dead River Co., is charging a “prepaid fixed price plan” of $2.95 per gallon for heating oil this coming season compared with $2.35 per gallon last year, a 26 percent increase.Under the plan, customers before the season begins prepay for the number of gallons they want to purchase at a set price per gallon, regardless of the market price of fuel.
Fixed price propane — for consuming between 751 gallons to 1,000 gallons annually — is going from $2.47 per gallon last year to $3.05 this year, up 24 percent.
Dead River, like all fuel distributors, is currently offering a lower price to customers purchasing heating fuels without a fixed contract, although that approach runs the risk of costing more when the cost of crude oil rises in the “spot” market. Customers alternately can chose a plan that “caps” the price they will be required price if fuel costs rise while allowing them to pay less if the the market costs of fuel falls.
The higher fixed cost this year is “impacted by the reduction of the amount of crude oil in the marketplace,” Lisa Morrissette, director of marketing at Dead River in Portland, Maine, said via email. “Over the last couple of years there has been an excess of crude; but this year the excess has been reduced due to OPEC production cuts, as well as reductions in Venezuela’s output.”
Last Wednesday, in its weekly petroleum report, the U.S. Energy Information Administration noted that Brent crude oil price increases this year “have been largely driven by unplanned supply disruptions and the expected loss of some Iranian crude oil production by the end of the year because of renewed sanctions.”
At the same time, the EIA forecasts that the price of Brent crude, after steadily rising since 2016, will level off to $71 a barrel in 2019 because of softening global demand. That optimism was tempered, however, by uncertainty over OPEC’s expected curb on production and what might develop in Venezuela and Iran.
At Simple Energy, a Lebanon home fuel distributor, the “fixed price prebuy” for heating oil this coming season is increasing 29 percent to $2.89 per gallon from $2.24 per gallon last year, according to co-owner Kinson Craft.
For propane, the fixed price is holding steady at $2.34 per gallon, the same price as last season.
Brown, the Vermont deputy commissioner, said his department is currently putting together its estimates of how many households may need fuel assistance this coming winter. States are still waiting for Congress to vote on a new federal budget that will determine funding levels for block grants to help those in need.
Last year Vemont received slightly more than $20 million in federal funding, which helped about 20,500 households — down from about 27,800 in 2013 — with an average benefit of $859. Households are eligible if they earn 60 percent of the state’s median income level, which in Vermont is equivalent to 185 percent of the federal income level.
“The budget deal last year gave us more money than we were anticipating,” Brown said. He’s not betting on a miracle, but if Congress level funds the program, “that would be good.”
Once the dominant fuel for heating homes in Vermont, heating oil today accounts for only 50 percent of the homes in the state, while natural gas and propane each have about 15 percent and electricity provides the remainder, said Matt Cota, executive director of the Vermont Fuel Dealers Association.
(Matt Cota and Casey Cota are cousins and the grandchildren of Cota & Cota founders, Ken and Helen Cota).
Deciding whether to opt for a fixed-price prebuy contract or simply paying the retail spot price for fuel oil — distributors offer any number of additional twists on the plans — and calculating which is the cheapest way to go depends on several factors, including how many gallons a household consumes (which in turn depends on the size of the house) and the temperature at which the thermostat is set.
“Generally speaking, buying your oil through a prebuy or fixed plan guarantees the price you will pay. It does not guarantee savings — although it usually does,” said Matt Cota.
For example, the spot price of fuel oil can take a sudden turn downward, as it did in 2008, when customers paid around $4 per gallon for fixed cost contracts only to find the spot price collapsed a few months later, leaving them committed to paying the earlier, higher rate while the cost was half as much on the market.
But you can’t always put a price on the security of knowing your tank will be filled. Last year’s cold snaps flooded the phone lines of heating oil and propane distributors from worried homeowners.
“The real issue for most people who buy fixed is peace of mind and knowing that in the darkness of winter you’ll have automatic delivery,” Cota said. “In January, there can be a lot of panicked people.”
John Lippman can be reached at jlippman@vnews.com.
