Asbury Park Press

Cold Comfort

Asbury Park Press — Sunday, October 12, 2008

By David P. Willis

Heating costs this winter are expected to chill your wallet.

Both oil and natural gas rates are higher than they were last year. But the economic crisis has done one thing: the costs for heating fuels are lower now than they were this past summer, tempering the possible increases.

"They have continued to fall the past couple of weeks, which is a good thing for consumers," said Wende Nachman, director of the New Jersey Citizen Action Oil Group. Still, she said, "It is going to be a struggle for heating oil customers this year. Oil prices are still much higher than they were last year."

Last week, the U.S. Energy Information Administration said that average U.S. households are expected to spend $1,137 to heat their homes this winter, a 15 percent increase over the estimated $986 spent last year.

Holmdel resident Michael Silverman, who uses fuel oil to heat his home, will be watching the thermostat.

"We are more conscious of the temperature in the house. We will do what we can do to conserve this winter," Silverman said. "We have thought about exploring alternative energy sources in the past. I think we will give that another look as well."

Most use gas

In Monmouth and Ocean counties, more than 75 percent of households use natural gas for heat, according to a 2007 U.S. Census survey. More than 9 percent use fuel oil, while the remainder use sources such as electricity, propane and wood.

Earlier this month, state regulators gave New Jersey Natural Gas permission to raise bills by 12.2 percent, a combination of two increases that covers the cost of both the distribution and the supply of wholesale natural gas.

A typical heating customer who uses 164 therms per month in the winter is seeing his or her monthly bill rise from $243.02 to $272.77, up $29.74, the utility said. New Jersey Natural Gas had originally asked for increases that would have pushed bills to $302.62, up $59.60.

Since June, wholesale natural gas costs have dropped. Those are passed directly through to consumers, and that is one of the factors that narrowed the increase.

Prices "decreased significantly from when we filed to when the prices went into affect," New Jersey Natural Gas spokesman Michael Kinney said.

Kinney said natural gas production was higher than expected and natural gas storage is at good levels. New Jersey Natural Gas was able to lock in lower-than-expected prices, he added.

"We will continue to monitor the market. If prices continue to drop and we are able to pass credits or refunds or rebates to customers, we will continue to do so," he said.

While still up over this time last year, prices for home heating oil have eased as crude oil prices have dropped.

Last week, the EIA said the average retail price for home heating oil in New Jersey was $3.67 a gallon, up from $2.85 a gallon last year. This winter, prices in the Northeast are expected to average about $3.90 per gallon, up from $3.31 a gallon last winter, the EIA said.

Earlier this year, it looked like home heating oil would cost $5 a gallon, said Tom Kloza, chief oil analyst at Wall-based Oil Price Information Service. "It has been incredibly higher" than now, he said.

For homeowners who use electricity to heat their homes, it can be a little harder to tease out the exact portion of their bills that pays to keep them warm. But a residential customer of Jersey Central Power & Electric Co. who uses 1,500 kilowatt hours per month will pay $256.87 this year, up 11.7 percent from $229.97 last year, said company spokesman Ron Morano.

Limited options

Silverman said there's not much to be done about higher heating costs. "You can drive a little less when gasoline prices are high. There's only so much you can do with heating costs."

Oil prices have declined with worries of a slowdown in worldwide demand as the financial troubles in the United States and abroad escalate. Likewise, gasoline and fuel oil prices also have fallen.

"If you are down in the financial markets, you are going to be down in oil because it's essentially a proxy for economic growth," Kloza said. "You have lower oil prices, but the only reason you have lower oil prices is because of everything that is horrible that is going on in the economy."

Prices later in the heating season are prone to spikes of 50 cents or $1 per gallon if winter brings clusters of cold weather, Kloza said. "It's like arena football. The scoring is fast and furious and moving in both directions."

But for the next 60 days, prices will be tied to the economy. "If you start to believe that maybe the economy has flattened out or we have seen the worst of it . . . one of the ways you can sort of vote on that is probably to say, "Hey this might be a good time to load up for some of the winter fuel,' " Kloza said.

Speculators play a role

Eric DeGesero, executive vice president of the New Jersey Fuel Merchants Association, said speculation has played a role in oil prices.

"What we have seen in this dramatic decrease in price in just the past couple of weeks further proves our point that the fundamentals of supply and demand don't dictate the price," DeGesero said. "You have seen a flight out of commodities."

Prices at Midway Ice and Fuel Co. in Neptune were as high as $4.30 a gallon until recently and have dropped more than $1 since. Volatile oil prices have made it difficult for the oil dealer to predict his own prices.

A $4 or $5 swing in crude oil prices could result in a 10 to 15 cent per gallon difference, said Midway owner Dan DeSeno.

"We don't know what prices we are going to have on a daily basis," DeSeno said. "We don't know how much we are going to pay because of the volatility."

On one day last week, prices were $3.56 a gallon at Globe Petroleum in Red Bank, down from $4.72 in July, said owner Pat Mazzucca. A year ago, it was $2.79 a gallon.

"People think that the distributor makes more money when the price is up. That's not true," he said. "We are in the same boat as everyone else when the prices go up. It hurts. It's not a good thing."

Copyright 2008 Asbury Park Press

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