Oil cost sparks heating worries Fuel firms offer pre-season deals

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Enjoying the warm season in Maine is reason enough for people to put off thinking about the freezing temperatures and short days that come with winter.

With oil prices rising to more than $60 for a barrel of crude, however, many Mainers are wondering what kind of heating costs the colder months will bring.

Regional heating fuel companies are rolling out pre-season purchase plans that could offer customers future savings. Some consumers, fearful of having to pay higher prices later, are signing up; others, apparently in hopes that oil prices come back down before winter arrives, are holding out to see what happens.

Heating fuel prices have risen significantly in recent years. The average price for a gallon of heating oil during the 2003-2004 winter season, when prices rose from $1.25 to $1.56 per gallon, was $1.42, according to the Maine State Planning Office.

Last fall, oil prices started out at $1.78 per gallon but rose $0.34 during the winter to a record high of $2.12 per gallon. The similar average per-gallon costs of kerosene and propane also each rose more than 30 cents last winter, according to statistics compiled by the State Planning Office.

Tim Dysart, vice president of Dysart’s Inc., said Wednesday that his company has two purchase plans for heating oil, one with a price of $2.149 per gallon and the other at $2.199 per gallon.

Dysart’s price of $2.149 is for customers who sign up for the company’s pre-buy program, in which customers pay for all of their winter heating fuel in one lump sum before the heating season begins. The higher price is for the budget plan, in which customers pay a monthly, locked-in rate.

“[If] the [wholesale] price goes up or down, that’s what you pay,” Dysart said of the set rate in the budget plan.

Dysart said his company does not offer a capped-rate plan, in which customers pay a higher rate with a guarantee that it won’t exceed a certain amount but have the option of paying a lower price if wholesale oil prices decrease. He said the company felt that limiting the number of plans it offers was simpler for consumers.

Without signing a purchase contract, heating fuel customers will have to pay fuel providers the market or “street” price for each as-needed delivery.

Dysart said his company, which he characterized as “middle-sized,” has not yet signed up a significant number of its customers for either of its purchase plans.

“I think people are hoping the price is going to go down,” Dysart said.

Dysart declined to predict what might happen with oil prices this winter. He acknowledged that waiting to see how the price might change was “very close” to gambling.

“I don’t even have a guess,” he said.

Tim Spellman with D.A. Pearson Heating Oils of Hermon said Thursday that the prices for pre-purchase plans change daily. He said that the price Thursday for D.A. Pearson’s pre-buy program was $2.199 per gallon while for the company’s budget program it was $2.299 per gallon.

Like Dysart’s, D.A. Pearson does not offer a “capped-rate” plan. Customers can sign up for the plans offered by D.A. Pearson, as they can for those offered by other companies, through the end of September.

Spellman said customers are nervous about rising oil costs and are more likely than before to switch companies in search of a lower price. He estimated that 90 percent of the company’s clientele is signing up for pre-purchase plans, which is making for a busier summer for the company’s sales staff.

“I know it’s very popular,” he said of the pre-purchase plans. “People want security.”

Robert Tracy, executive vice president with R.H. Foster Energy, with headquarters in Hampden, said Thursday that his company offers pre-buy and budget plans and that, like capped plans, customers can pay extra with each plan for downside protection in case wholesale prices decline during the winter. Because the contract prices change daily, Tracy declined to identify what prices R.H. Foster was charging Thursday for each plan.

“It’s very dynamic,” Tracy said of the market. “Anything that can make [the wholesale price] move around, it does.”

A Web site maintained by Portland-based Energy Data Corp., www.maineoil.com, on Thursday listed dozens of eastern Maine heating fuel companies that were charging prices for that day ranging from $1.90 to $2.26 for a gallon of oil. Kerosene prices listed on the same Web site on Thursday ranged from $2.10 to $2.56 per gallon.

Beth Nagusky, Maine’s director of energy independence and security, said Wednesday that the state has started tracking fuel prices year round instead of just during the winter out of concern over how fast they are rising. The volatility of fuel prices – which Nagusky attributed in part to market speculation, global politics, and the oil industry’s tight supply-and-demand margins – increasingly is becoming a problem for low-income Mainers, she said.

The state doesn’t recommend what sort of heating fuel purchase plans consumers should consider, Nagusky said.

“A plan that is best today may not be best tomorrow,” she said. “We encourage people to talk to their own oil dealers and to shop around.”

There are approximately 450 oil dealers in Maine, according to Nagusky.

She stressed that consumers should do what they can to be more energy-efficient. People should consider buying cars with good fuel mileage, she said, and should look into ways their homes can be heated more efficiently.

A list of average heating fuel prices in Maine can be found on the Internet at www.maineenergyinfo.com, Nagusky said, while a list of certified home energy auditors can be found on the Web site of the Maine Public Utilities Commission.

This winter, the state intends to continue with its Keep Maine Warm program, a public-private partnership in which volunteers install heat conservation materials in the homes of those who qualify for federal energy-assistance funds, the state energy official said.

“We’re doing that again this year,” she said. “We’re going to try to do 2,000 [homes] if we get sufficient volunteers.”

Chris Brown, president of Energy Data Corp., said Wednesday that he recommends waiting to buy heating oil. Brown said the current oil price of more than $61 per barrel is not justified by market forces.

“It’s not supply and demand. That’s what the problem is,” Brown said. “Is there a supply problem? Absolutely not.”

Oil producers are charging high prices because of demand, not supply, and because of a certain degree of apathy among consumers, he said.

Some oil producers have blamed a recent hike in crude prices on the death Monday of King Fahd of Saudi Arabia, but Brown dismissed this explanation as a legitimate excuse. King Fahd had been in poor health for a decade, and the expected succession of former Crown Prince Abdullah to the throne has been realized, he said, nipping in the bud any concerns about instability in the oil-rich desert kingdom. “The second demand drops, prices will go down instantly,” Brown said. “I feel they have to go down.”