November 23, 2024
Business

How much higher? Maine experts ponder whether gas, heating oil prices have plateaued

Anyone in Maine who has purchased gasoline in recent days likely has come out of the experience asking whether $3 a gallon for gasoline should be considered a high price or be accepted as the norm.

The global market for oil and petroleum products has long had a reputation for being unpredictable. But since late last summer, when hurricane damage along the Gulf Coast and other supply factors made gasoline prices nationwide leap 30 cents or more virtually overnight, oil customers of all kinds have been jumpy with worry about the next price spike.

In Maine, energy costs affect everything from the manufacturing sector to the cost of consumer goods to how much money summertime tourists are willing to spend on gas. Market volatility is making Mainers confront issues such as how far they can affordably commute to work each day and what kind of fuel they should use to heat their homes.

And now that it is August, the hurricane season is heating up and heating oil customers are starting to think about whether they should look into pre-purchase plans.

Nobody has a crystal ball for what gas and heating fuel will cost in the coming months, oil industry officials in Maine have said. But the more time goes by, the more it looks as if gasoline prices may stay at or above the $3-a-gallon threshold they first crossed last September in the wake of Hurricane Katrina.

“It’s hard to say whether that is already a really high number or not,” Jamie Py, president of the Maine Oil Dealers Association, said Wednesday. “It’s not looking like a spike [on a graph]; it’s looking more like a plateau. But it could drop at any point.”

The average regular-grade gasoline price in Maine declined during the fall and winter to around $2.25 a gallon, but by July it had crept back above pre-Katrina levels to around $2.85, according to AAA’s Daily Fuel Gauge Report. In the past month, it has risen 15 cents and more in Maine and is back above $3 a gallon, AAA indicated.

Heating oil prices also continue to rise, according to a statewide survey conducted Aug. 1 by Maine Office of Energy Independence and Security. The average price at the start of the month was $2.46 a gallon, which is 12 cents higher than it was in March and 31 cents higher than it was one year ago, the survey indicated.

Pat Moody of AAA Northern New England in Portland said Thursday that $3 gasoline is likely here to stay. Not only is the supply tight and demand high, he said, but the continuing use of aging domestic oil refineries and pipelines will make production more expensive.

“We’re used to gasoline around the $2 mark, and that day has come and gone,” Moody said. “[Maintenance costs] are going to be adding to what it costs to get it out to people, and we’re going to be paying a little bit more at the pump.”

Oil prices fell nearly $2 a barrel late this week as air traffic slowed on the heels of an alleged terrorist plot aimed at trans-Atlantic flights between the United Kingdom and the United States. But news of the plot seemed to have little effect on gasoline prices in Maine as service stations in the far northern and eastern reaches of the state continued to charge around $3.20 a gallon.

A few retailers in Newport, however, appeared to be bucking the $3 trend, according to the Web site Mainegasprices.com. It indicated that as of Thursday morning, at least three local stations were selling gasoline for less than $2.90 a gallon.

Several global factors have been blamed recently for keeping prices high. Civil unrest in oil-rich Nigeria, United Nations displeasure with Iran’s nuclear development program, and fighting in the Middle East between Israel and Hezbollah continue to have an adverse effect on the global crude oil market.

Prices also had jumped earlier this past week after BP reported it was shutting down an oil pipeline in northern Alaska because it was corroded and had a leak. Py said the reaction to this news shows both how tight supplies are and how volatile the market can be. According to Moody, however, the price reaction to this news was turning out to be not as severe as analysts initially had feared.

The rise in prices prompted Sen. Olympia Snowe and Gov. John Baldacci to make separate appeals this week to President Bush, asking him to release part of the federal petroleum reserve in order to help decrease supply pressures.

As for heating oil price, there are indications that results of the statewide Aug. 1 survey already might be off the mark for some parts of Maine.

According to Portland-based Energy Data Corp., many heating fuel dealers in northern and eastern Maine this week were charging more than the reported $2.46 average. The firm’s Web site, www.maineoil.com, indicated Thursday that several dealers in the region were charging around $2.50 or $2.60 a gallon.

Tim Spellman of D.A. Pearson Heating Oils in Hermon said Thursday that his company’s budget plan, in which customers space out their oil payment over a 10- or 11-month period, was capped at $2.89 a gallon, which is more than 50 cents higher than the statewide average at the end of March. He said the company has been receiving many calls from people shopping around for the best pre-purchase plan for their winter oil.

Spellman said Pearson employees frequently take the brunt of critical comments from customers about the high price of oil, even if a customer realizes the price is beyond the company’s control.

“It gets political at times,” he said. “We simply tell them, ‘Hey, we’re just an oil company.'”

Spellman said that last summer, Pearson was offering some purchase plans with prices less than $2 a gallon.

“I don’t think you’ll see ones anymore,” he said, referring to the dollar numeral in heating oil prices.

Tom Brown, a certified energy auditor and building trades specialist for Penquis Community Action Program, said he and his colleagues have been busy this summer conducting audits for people who qualify for federal home heating assistance. The agency also has received more audit requests this year from people who do not qualify for such assistance, he said.

“We’re pretty well maxed out,” Brown said. “I think a lot of people are getting nervous because of oil prices.”

Homeowners can best prioritize improvements to their homes if they have it surveyed by a certified energy auditor, Brown said. The agency’s home-improvement projects average around $1,400 to $1,500 each, he said, but depending on the house, homeowners can make it up by saving as much as 50 percent in heating costs.

Py said that aside from market volatility, oil dealers are facing a new law that may make it more difficult for them to serve customers in their area. The state now requires oil dealers that participate in the federally funded Low Income Home Energy Assistance Program to give discounts to customers that qualify for assistance, federal funding for which has remained flat in recent years.

Before the change in state law, oil dealers received full price for delivering to LIHEAP homes, although they incurred extra administration costs by collecting payments through Maine State Housing Authority rather than directly from the customer. They still will incur those extra administration costs for their LIHEAP customers, he said, and now face the added burden of having to discount the oil.

Oil dealers do not operate on high profit margins, Py said, and will have to find ways to make up for the lost revenue.

“You’ve got to make it up somewhere,” he said Wednesday. “It will force us to charge everybody else more money.”

For many oil dealers, LIHEAP customers make up a significant portion of their customer base, according to Py. Withdrawing from the LIHEAP program may not be a viable option for many such dealers, but staying in it and trying to find another way to make up for the lost revenue might not have much promise either.

“It’s going to be a hard decision on whether [the dealers] want to do it or not,” he said.


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