CourierPostOnline

Oil Heat Customers Play Price Roulette

CourierPostOnline — Sunday, August 24, 2008

By EILEEN SMITH
Courier-Post Staff

For the past month, the price of heating oil has been creeping lower, leaving consumers with a sticky question.

Should they top off the tank now, or wait and hope prices continue to drop?

At WB Steward in Woodbury Heights, fuel oil was priced at $3.79 a gallon last week, down nearly $1 a gallon in little more than a month.

"Most of our customers are aware of the volatility in the oil market and they realize it's something that's out of our control," said Chris Roethke, sales manager.

Even with moderating prices, consumers can expect to pay 31.3 percent more for heating oil than they did last year, according to the U.S. Energy Information Administration.

"We're seeing a little dip of the price but that typically increases as we get into the heating season," said Jonathan Cogan, energy information specialist.

Spot prices for crude oil have fallen from $142.25 a barrel the week of July 4 to below $120 a barrel last week.

Consumers can thank the feeble economy for the decline.

"There's less demand for oil because there's less economic growth," Cogan said.

Still, the EIA forecasts the average residential customer in the Northeast will pay $4.19 a gallon for fuel oil this year, a penny more than the national average of $4.18.

"We're still forecasting significantly higher prices," Cogan said. "And if it's a colder winter than usual, prices will rise even higher."

About 20 percent of New Jerseyans heat with fuel oil, according to the U.S. Census Bureau. The majority – about 66 percent – heat with natural gas.

The EIA is forecasting a 21 percent rise in natural gas prices. That's in line with requests to the Board of Public Utilities by the state's four natural gas providers to raise rates between 18-22 percent on Oct. 1.

Well before the first frost, consumers are looking for ways to pay heating bills. Applications are running 14.2 percent over last year for the Low Income Home Energy Assistance Program and 12 percent for the Universal Service Fund program, said Eileen Leahey, spokeswoman for Public Service Electric & Gas.

"There are people who are seeking help for the very first time, people who are out of a job or have medical bills," she said.

Jim Walsh, program director at New Jersey Citizen Action, said applications to join the group heating oil cooperative have spiked during the summer, from 15 a month in previous years to more than 100 a month.

The consumer advocate group, with offices in Camden, Highland Park and Passaic, offers member discounts on fuel.

"I've been setting aside extra money myself," Walsh said. "A month and a half ago I filled up my tank and oil was more than $4 a gallon."

Thelma Morris of Pennsauken topped off her tank early this month when oil cost 75 cents a gallon more than it did last week.

"That's almost $100 more than if I bought it today," she said. "But I was afraid it would only get more expensive."

At Cundiff Oil Co. in Bellmawr, some customers are sitting on the fence, trying to gauge prices. Recently, Cundiff was delivering oil at $3.99 a gallon, down 80 cents in three weeks.

"Some people are deciding it's time to top off but others are waiting to see if the price comes down," said spokeswoman Noreen Pergolizzi.

Instead of locking in oil prices, consumers might want to get on a budget plan in which they make monthly year-round payments, said Eric DeGesero, executive vice president of the Fuel Merchants Association of New Jersey. Or they can opt for a plan with a cap in which prices won't rise above a specified level.

"There's zero rationality in this market right now," he said. "An oil dealer doesn't have a crystal ball."

While customers are paying more for oil, DeGesero said dealers are increasingly hard-pressed to make a profit.

Dealers are lowering their markup on wholesale prices to remain competitive, he said. Cash-strapped customers are paying late or charging fuel on credit cards, adding processing fees to dealers' operating costs.

"Plus, in this high-priced environment, homeowners are buying less," he said. "They've changed their behaviors."

At WB Steward, technicians are tuning and upgrading heaters to make them more energy efficient. They also are advising customers on energy-saving techniques, such as insulation and weather stripping, Roethke said.

"Many of our customers are on fixed incomes and prices have risen to the point that it's difficult for them to afford," he said.

Steward, the FMA and New Jersey Citizen Action all support legislation that would put curbs on energy prices.

"We are encouraging our customers to step up and contact their elected officials, too," Roethke said.

This year, Congress failed to enact legislation that would channel excess oil profits into alternative energy sources or relief for consumers.

Looking ahead to winter, the EIA predicts oil prices will continue to be a hot topic for consumers.

"There isn't any way people can look at oil dropping to $3.99 a gallon and feel enthusiastic," Cogan said. "Certainly no one is calling these low prices."

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