Winter Heating Costs May Burn Consumers

BOTTOM LINE WEATHER POINTS
– Hurricanes pipeline disruptions may worsen soaring price of heating oil this winter.
– Massachusetts consumers can expect their annual heating bills to exceed $3,000.
– Homeowners and companies reluctant to pre-buy oil plans due to market instability.

The current Gulf Coast pipeline disruptions caused by Hurricanes Ike and Gustav highlight a sobering reality for homeowners across America. Even if winter conditions this year are not particularly severe, heightened oil market anxieties are still likely to burn consumers.

Mounting uncertainty in the oil market, most recently caused by the interference of Hurricanes Ike and Gustav, have far less consumers willing to buy home-heating plans in advance, according to Business West, a Massachusetts financial publication.

“Things have definitely changed,” said Laura Benoit, co-owner of Bay State Fuel Oil. “A lot of people are not pre-buying their fuel this year. I don’t know if that’s because they can’t afford it, or because they’re speculating. But with the price being as high as it is, it just puts it out of reach for many people to come up with that kind of money.”

Unpredictable prices have several dealers biding their time as well, according to Ted Noonan, president of Noonan Energy. Like consumers, many companies continue to speculate far later into the season than usual.

“Usually, we’re out with a program in August, but we felt the market was too out of whack to go there,” he said. “It’s a big risk for dealers to put a program together because, depending on which way the market goes, it could be a windfall, or it could bankrupt their company. Nobody’s willing to do it because no one knows what the price is going to be.”

Oil prices averaged around $2.80 per gallon on Nov. 1, 2007 and shot close to $4.50 by midsummer. Since then, the price of oil has fallen off, but analysts still expect homeowners to pay around $3.50 per gallon at the start of this year’s heating season.

In the state of Massachusetts, the UMass Donahue Institute predict approximately 163,224 low- and moderate-income households will have difficulty paying their heating-oil bills this winter.

Between 2003 and 2008, the regional retail price of home heating oil rose more than 175 percent, from $1.43 per gallon to an average of $4 per gallon this year. Based on average consumption in recent years and the most recent federal forecasts, Massachusetts household expenditures this year on home heating oil and natural gas heat are expected to total $927.2 million, followed by an additional $469.9 million increase in 2009.

The projected annual figures add up to one cold, hard fact – the average Massachusetts household's oil heat bill is projected to exceed $3,000 in 2009.

“Massachusetts is facing a true crisis,” said Robin Sherman, the report's lead author, “and our analysis sheds light on the magnitude of the problem.”