Residential Heating Oil Customers In North Jersey Welcome Savings And So Do Dealers

The Record ( — Tuesday, December 30, 2014

The Record

As North Jerseyans turn up the thermostat for winter, oil-heat customers are getting a bonus: Heating oil, like gasoline, has suddenly become much cheaper.

A gallon of heating oil, which cost $4.09 a year ago, now averages $3.23 in New Jersey, according to the latest data from the U.S. Energy Information Administration, and prices are expected to drop further. The lower prices are projected to mean savings of about $700 for the average oil customer this winter.

"Having lower oil prices is going to be a help for me," said Joan Jouas of Ridgefield Park, a 79-year-old retired office worker who relies on a small pension and Social Security. "When I saw gasoline prices coming down, I wondered if heating oil was coming down, too."

Alexander DeMarco, a 67-year-old mail carrier, lives in a Paramus ranch house with a 550-gallon underground tank.

"There were times that I put in 400 gallons — that's a big amount to pay out all at once," DeMarco said. "How can I not be happy about the lower price, when just months ago I paid $3.60 or $3.75?" As a member of the New Jersey Citizen Action Oil Group, DeMarco pays a discounted rate; a recent fill-up cost him $3.13 a gallon, and prices have dropped since then.

The cost of heating oil follows the recent path of other fossil fuels, which have also plunged, benefiting consumers this year. For example, gasoline prices now average $2.41 a gallon in Bergen and Passaic counties, down from $3.30 a year ago, according to AAA.

The lower consumer prices reflect turmoil in the oil industry, where prices have fallen to about $60 a barrel for the first time in five years. U.S. oil producers have boosted production levels, tapping shale formations in North Dakota and other states, and the Organization of Petroleum Exporting Countries recently decided not to cut output, despite high inventory and lower international demand. While many of the world's economies are stagnant — Japan is in recession, most of Europe is on the brink of an economic downturn and China's economy, nearly the world's largest, is decelerating — the U.S. gross domestic product grew at a 5 percent annual pace from July through September, the biggest gain since the third quarter of 2003.

The new price landscape is a big change for consumers, who had grown used to high energy costs since the oil-price shocks of the 1970s, when oil prices quadrupled in less than 18 months. These new, lower energy prices mean American consumers have more money to spend on other items. A government report on Tuesday said consumer spending grew at a solid 0.6 percent pace in November.

Oil is not the only fuel whose price is tumbling. The price of natural gas — the heating source for most Garden State customers — has come down more than 50 percent in the past six years for Public Service Electric and Gas customers, largely as the result of inexpensive new supplies from the Marcellus Shale formation in Pennsylvania and surrounding states. The average PSE&G residential gas bill this winter will be $676, down $118 from last year and down $625 from the winter of 2008-09, according to the Newark-based utility.

The average residential oil-heat customer uses about 700 to 800 gallons per heating season, according to the Fuel Merchants Association of New Jersey in Springfield and New Jersey Citizen Action Oil Group, which offers oil at a discount of 30 cents to 50 cents per gallon for its 2,000 members. If oil drops to $3 a gallon, that would mean a winter heating bill of $2,100 for 700 gallons.

Only 12 percent of New Jersey households, or 380,000 customers, use oil heat in New Jersey, according to the fuel merchants group. The number has declined in the past several decades because many customers switched to natural gas, as prices for that fuel dropped and homeowners got rid of underground oil tanks, which can leak. Homeowners often remove the underground tanks when they sell their homes because most buyers won't accept the risk of a tank.

Oil-to-gas conversions have slowed recently as oil prices have come down, said Eric DeGesero, executive vice president of the fuel merchants association, and Wende Nachman of the Citizen Action group.

The lower prices are not just a benefit to customers; heating-oil dealers like them, too. Shotmeyer Brothers, an 88-year-old heating oil company in Hawthorne, said customers are more likely to get big deliveries, rather than ask for 100- or 200-gallon deliveries, General Manager Eric Ehrman said.

"Now, a lot of them are saying, 'Let me fill my tank because prices are significantly lower than last year,'Ye" Ehrman said.

Scott Majka of Jos. A. Majka & Sons in Clifton has had a similar experience this year. He called the price drops "awesome."

"When the price is high, it's difficult for everybody," Majka said.

Majka has to pay his supplier within 10 days of getting a shipment. But when heating oil is expensive, many of his customers can't pay hundreds of dollars for a large delivery at once, and want to stretch out their payments by as much as three months. He accommodates them.

"My customers are long-term customers," he said. "It's hard to turn grandma's heat off and let her get cold."

As a result, he often has to borrow against his bank line of credit to cover his costs.

"Cash flow becomes an issue in the winter," Majka said.

But this year, Majka said, customers have been less likely to ask for credit.

Some oil companies offer customers the chance to lock in heating oil prices earlier in the year, although the fuel merchants group said it doesn't know how many customers typically make that choice. This year, customers who did so are probably regretting it.

Shotmeyer does not offer clients the option of locking in prices in advance. Majka does, but in any year, only about 5 to 15 percent of Majka's customers make that choice.

"It depends on the climate, and not just the weather — I mean political as well," Scott Majka said. This year, he said, as customers watched energy prices move lower, few locked in prices early.

Top Top | NJCA Homepage | NJCA in the News