Maine’s heating oil prices on the rise Thousands await U.S. aid

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While home heating oil prices already are on the rise, thousands of low-income families in Maine have yet to receive federal financial assistance to help them through the cold nights.

The Maine State Housing Authority, which administers the federal Low Income Home Energy Assistance Program, has not yet received funds due Oct. 1 from the federal government, Jo-Ann Choate, energy program manager, said Friday.

The program is funded from Oct. 1 to Sept. 30.

More than 12,000 low-income families already have applied for LIHEAP funds, and that number eventually could exceed the 45,000 families MSHA budgeted to help this year. Penquis CAP, which serves low-income families in Penobscot and Piscataquis counties, has 3,875 applications already, up from 2,030 in October 2002. Both counties have been hit hard by the bankruptcy of former Great Northern Paper Inc. and the loss of 800 mill jobs.

“That’s quite an increase” in applications, Choate said. “It’s the result from the mills and the layoffs.”

MSHA expects to learn soon how much money will be disbursed in the first installment of this year’s program by the federal government. The delay in releasing funds at the beginning of the month is attributed to the lack of a congressionally approved budget.

“It’s starting to be a problem right now,” Choate said.

According to representatives of Maine’s two senators, Susan Collins and Olympia Snowe, the Office of Management and Budget should be releasing the LIHEAP money to states early next week, although they haven’t been told how much Maine will be receiving.

Even when the money does arrive, benefit amounts have been reduced from a maximum of $480 per household last year to $440 this year, according to Choate.

“That’s not a lot [of assistance] when you think of prices being 7 cents higher from last year,” Choate said. Benefit amounts could be raised, however, if LIHEAP funds are increased or supplemented later in the year.

The Maine State Planning Office, which tracks home heating oil prices, said in a statement released Monday that heating oil prices were 36 cents lower on Oct. 6 than in March, but are up 7 cents a gallon compared to last October.

One national forecast, released by The Kiplinger Newsletter in August, stated that heating oil prices could top $2 a gallon this year.

“The power blackouts won’t be the only energy shock this year,” the Aug. 15 issue stated.

For most low-income families, the ability to take advantage of discount pricing plans offered by heating oil suppliers is lost when they don’t know how much financial assistance they will receive for the winter. Eighty percent of Maine’s households use heating oil as their energy source each winter, and between one-third and one-half of them already have locked into a price or have signed up for other budget plans, according to the Maine Oil Dealers Association.

Chris Brown, owner of MaineOil.com, said the federal government should change the way it manages LIHEAP to give low-income families more bang for their buck. He said he believes the federal funds should be made available in the spring or early summer when heating oil prices typically are at their lowest, instead of October.

“They [low-income families] can’t buy oil until it gets cold and the money becomes available,” he said. “If they could have bought it at the end of August or early September, everyone would have saved at least 11 cents a gallon.”

After the 1999-2000 winter, when heating oil prices exceeded $1.70 per gallon, numerous federal and state government officials discussed changing the LIHEAP funds release dates to the summer instead of the fall.

“That never happened,” Choate said.

Price forecasts

This week, the price of a gallon of heating oil averaged $1.25 statewide. The low was $1.09, and the high was $1.40.

But will the price go up any more than that, and if so, how much?

A number of price forecasts have been issued recently and they all vary on what kind of prices consumers should expect to pay this winter. Most of the prices are tied to what analysts believe weather conditions will be like this winter.

According to MaineOil.com, heating oil prices reached a high of $1.82 a gallon last year.

“We’re nervous about [oil prices reaching $2 a gallon] because there’s every indication that oil prices aren’t going to be coming down,” said Richard Davies, a policy analyst in Gov. John Baldacci’s administration who previously oversaw LIHEAP for the state’s community action programs. “It does look a little bit nerve-racking.”

The Kiplinger Newsletter, based in Washington, D.C., which says it issues “forecasts for management decision making,” said in its Aug. 15 report that “heating bills will soar this winter.”

“The price of heating oil will jump to an average of $2 a gallon,” the newsletter stated. “A colder than normal winter in much of the nation will compound the pain.”

This winter, like last year, could be a cold one, according to The Farmer’s Almanac, which boasts an 80 percent accuracy rate for its weather predictions. There will not be as much snow in New England, but it will be extremely cold, the publication forecast in September.

During last year’s colder-than-normal winter, the average consumer purchased between 100 and 200 more gallons of heating oil, said Jill Carmichael, a bookkeeper at The Heaten Oil company in Glenburn.

“As far as oil prices, it’s hard to predict what they’ll do,” Carmichael said this week. “It’s a gamble.”

On Wednesday, the Energy Information Administration of the U.S. Department of Energy estimated that under normal weather conditions households could expect to pay 8 percent less this year compared to last year. That would mean a nationwide average of about $1.33 per gallon from October through March.

But the same Energy Department forecast also states, “The risk of higher fuel prices under a colder-than-normal winter scenario is substantial. Cold weather could add an additional eight to 16 cents per gallon to our base case projections and perhaps even more at the local level.”

Besides the weather, events on the world political stage could contribute to higher prices. The ongoing Iraq war and OPEC’s recent decision to cut crude oil production could cause a decline in supplies, but repairs to pipelines in Russia could compensate for OPEC’s reductions.

According to Brown, world politics always have been the root cause of increases in oil prices, or at least the reason given for spikes in heating oil prices.

“Every year there’s been a crisis,” said Brown, whose Web site tracks heating oil prices by dozens of distributors statewide. “There’s no reason to think, considering the way the world is today, there won’t be another crisis.”

Michael Shea, president of Webber Energy, said he believes politics have tempered lately and heating oil prices should remain below $1.50 a gallon through the winter.

“No one has a crystal ball,” Shea said. “But based on current market conditions, I don’t expect anything unusual.”

On the home front, however, consumers have been thinking about heating oil and locking in a rate with their suppliers. About 50 percent of Webber Energy’s heating oil customers are under a pricing plan, Shea said. On most plans, consumers lock into a per-gallon rate and pay that price on each delivery of oil.

According to Jamie Ty, executive director of Maine Oil Dealers Association, consumers have become “forward thinkers.” Many of them began shopping heating oil prices in May or June instead of waiting until September or October.

“The only way to eliminate the risk is to get into a contract,” he said.