Fill ’er up: Vermonters locking in heating oil prices
By Bruce Edwards
STAFF WRITER | August 31,2014
Albert J. Marro / Staff Photo
Charlie Skuba of Rutland Fuel hauls a hose to refill an oil tank at a home off Court Square in Rutland.
With August at an end, fall is just around the corner and so is another heating season.
It’s the time when homeowners look to lock in prices before winter when prices historically hit their peak.
The average August heating oil price in the state was $3.50 a gallon, 20 cents lower than July and 9 cents lower than a year ago, according to the monthly Vermont Fuel Price Report compiled by the Department of Public Service.
Matt Cota, executive director of the Vermont Fuel Dealers Association, called the decline in August good news for both consumers and fuel oil dealers in the state.
“The highest prices we have seen over the past three months were in the early part of June and we’ve been on a steady progression down,” Cota said. “These are our wholesale prices, which bodes well.”
He said oil traders took advantage of a geopolitical “fear” factor that helped drive up prices. But when that scare failed to gain traction, prices came down again.
In most years when a consumer locks in a fuel oil price in August, he said, “it’s going to be a better deal than buying in January.”
One recent exception was the winter of 2008-09. Consumers who locked in their oil price the previous summer as it hit an average of $4.65 a gallon saw the economy collapse in the fall — and oil prices along with it. By February 2009, the Vermont price had plummeted to $2.53 a gallon.
For a premium per gallon, many fuel oil and propane dealers offer price-protection plans to guard against market volatility Those plans can be combined with a budget plan, with the consumer paying installments that are typically over 10 months.
Dealers also offer pre-buy plans where a consumer pays a set price for a specified number of gallons without paying a premium, provided they pay the entire bill up front.
The Department of Public Service advises consumers to shop around before locking into a contract for the heating season, said Michael Kundrath, the PSD’s energy policy and program analyst.
The department’s August survey reported the average pre-buy cash price for heating oil in Vermont was $3.61 a gallon; the average budget plan price was $3.77 a gallon.
Kundrath said the price-protection plan prices for August were based on a very small sample of the state’s fuel dealers.
Vermonters continue to rely on oil more than any other fuel to heat their homes. Half the homes in the state, 120,000, heat with oil and another 38,000, or 15 percent, use propane. Another 40,000 homes use propane for cooking or as a secondary heating source.
Homes heated with oil use an average of 700 gallons per cold season, or 1,100 gallons for propane. Cota said it takes more propane to heat the same size house.
Comparing fuels based on the amount of heat generated, cord wood remains the least expensive at $14.65 per million BTU (British Thermal Units); wood pellets, $18.83; natural gas, $18.96; fuel oil, $31.68; kerosene; $36.99; and propane, $37.65.
The PSD also notes that advances in air-source heat pump technology have the potential to displace “a significant fraction of Vermont winter heating.”
Price is one of the advantages touted by Vermont Gas Systems as it expands its system in the state.
At current prices, natural gas is far less expensive than either fuel oil or propane. Vermont Gas spokesman Steve Wark acknowledged the price could increase in the future, but based on historical data he said it should remain well below the price of heating oil and propane.
“What we know is that the Energy Information Administration is forecasting a hundred-plus years supply of natural gas,” Wark said. “And while demand goes up, if supply continues to match or exceed that, it will keep the cost down.”
The onset of the heating season also means a demand for fuel assistance. Last season, 46,208 Vermont households received $21.4 million in fuel assistance. The average benefit for a homeowner was $792; the average renter benefit was $195.
That’s a decline from the 2012-13 season, when 48,000 households received benefits totaling $23.2 million. The average homeowner benefit was $898; the average renter benefit was $222.
Richard Moffi, the state’s fuel and utility programs manager, said the decline represents a nationwide trend.
“We’re attributing it to the slowly improving economy,” he said. “And when we were out at a national LIHEAP (Low Income Home Energy Assistance Program) conference this June, other states around the country were reporting the exact same thing.”
Moffi said some clients have either gotten a job or their income has improved to the point where they’re no longer eligible for aid.
For the upcoming heating season, Moffi is forecasting a continued decline to around 26,000 households — 600 fewer than last year.
A propane bottleneck last winter was caused by a shortage of fuel in the Midwest, and that was felt all the way to New England.
“We had trucks from Indiana that were rolling into Vermont to pick up product because they were simply out of it in the Midwest,” Cota said.
That in turn led to a spike in prices during the coldest part of the year.
Cota is urging Vermont consumers who heat with propane to fill up their tanks before the heating season to guard against a repeat of last winter. Compared to fuel oil, he said, propane has a shortage of storage facilities.
He said the propane industry is embarking on an ad campaign, encouraging consumers to fill up their tanks well before the onset of winter.
“Not only will you be a getting a good deal, a better deal than you would if you wait until the winter,” Cota said, “but you’ll also be helping everyone out by avoiding what we experienced last year, which is a real crunch in supply.”
Like heating oil, Cota said, propane has seen a significant drop in price.
Propane in August fell 42 cents a gallon from July to $2.76 a gallon. It’s also 26 cents a gallon cheaper than last August, according to the state’s monthly fuel price survey.
Vermont fuel dealers over the last two years have quietly shifted to low-sulfur heating oil. A state law went into effect in July mandating low-sulfur oil but Cota said the fuel dealers had already switched to the cleaner burning fuel.
He said low-sulfur fuel is better for the environment and reduces the need for maintenance on oil burners.