The Star-Ledger

Warning: Winter Will Be Costly

Heating bills could rise $1,000 from a year ago

The Star-Ledger — Wednesday, August 24, 2005

Star-Ledger Staff

Rich Rapiti is paying nearly 60 cents more per gallon for heating oil this year than last winter, but the radio consultant from Glen Ridge considers himself lucky to have locked in a price of $2.09. He hears some people may be paying as much as $2.75 this year.

"It's the best deal in town," says Rapiti of his contract with the New Jersey Citizen Action Oil Group, a cooperative with about 3,000 members. "My gut tells me heating prices are going through the roof."

With customers already paying record prices at the gasoline pump, the outlook for heating your home through natural gas or heating oil this winter is just as troubling and about as expensive.

Some New Jerseyans may find themselves paying $1,000 more.

The Energy Information Administration, an arm of the U.S. Department of Energy, is forecasting home heating oil prices are likely to be about 17 percent higher than last year. As for users of natural gas, last week New Jersey regulators approved rate increases that will boost customers' bills at least 2.8 percent and as much as 10.6 percent, depending on the utility.

Interviews with New Jersey heating oil dealers indicate price increases will exceed the national average.

David Neill, owner of M.J. Neill, a family-run fuel dealership in Bernardsville, was charging his customers about $1.46 a gallon last year. He is charging them $2.42 a gallon this season.

Some customers are putting off locking in prices for this winter based on the hope that prices will retreat before the season's onset, said Eric DeGesero, executive director of the New Jersey Fuel Dealers Association.

The high prices, coming on the heels of last winter's 34 percent increase, are attributed by DeGesero to an array of factors, ranging from the demand in fast-growing countries, particularly India and China, to the fear of hurricanes in the Gulf of Mexico.

The most direct factor is the rising price of crude oil, which topped $65 a barrel this week. A year ago, crude oil was trading at a little less than $50, according to Neil Gamson, an economist with the Energy Information Administration.

"Oil prices are high. Demand is high," Gamson said. "There does not look to be any decrease forthcoming for customers."

In the latest forecast by the agency, heating oil will run about $2.26 per gallon for the last quarter of 2005 and drop to $2.21 per gallon for the first quarter of 2006, Gamson said.

In New Jersey, where about 19 percent of homes use heating oil, consumers might be lucky to lock in that price. While some dealers are charging around $2.25 per gallon, it is common for customers to receive a $2.50 price quote, DeGesero said, and prices can run as high as $2.75 per gallon.

Roughly two-thirds of homes are heated by natural gas. Of the homes that rely on neither natural gas nor heating oil, most use electricity or propane.

Beyond the fluctuation of prices, the big unknown is just how cold the winter will be. The energy administration is forecasting a colder winter than last year's, and predicts an especially cold one for the Northeast.

Even fuel-buying cooperatives are having trouble with the escalating prices.

The Citizen Action cooperative locked in prices for customers in northern part of New Jersey at $2.09, compared with $1.53 a year, according to Wende Nachman, director of the group. The group uses its collective bargaining clout to lock in the best prices for buying huge volumes of heating oil, Nachman said.

"A lot of people have been shopping around. They know they're not going to find a deal better than us," Nachman said.

DeGesero said most consumers aren't surprised by the increase in home heating oil prices, given all the press the topic has received. "Are they screaming? No. Are they happy? No."

Some are trying to reduce costs by upgrading their home heating systems, said DeGesaro, who noted the demand for more-efficient heating systems is incredibly strong among his members' clients.

Neill said: "It becomes a big number if you upgrade your heating system and can save up to 35 percent on your fuel. At $2 and more a gallon, that becomes a big number pretty quick."

The logic is even more persuasive for the customers he typically services in Somerset, where expansive homes are the norm, Neill said. His typical customer might go through 1,000 to 1,200 gallons a winter, meaning an oil bill at least $1,000 more than last year's, he said.

Earlier this year, Neill signed up customers on budget plans at nearly $2.25 per gallon, but those customers could get hit with higher bills if the price keeps rising this winter, he said. In that case, he would send out amended bills in January.

For lower-income customers, the situation can be dire, Nachman said. Her group has been deluged with calls from senior citizens living on fixed incomes.

"From what we have heard, people are having a real hard time with this," she said. "They just don't know how they are going to get through the winter."

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