September 29, 2009 in Business

Heating oil prices should stay stable

Clarke Canfield Associated Press
 

PORTLAND, Maine – Homeowners who heat with oil were feeling sticker shock just over a year ago as prices soared close to $5 a gallon, but they’re breathing easier now.

Heating oil prices are barely half what they were in summer 2008 – and while prices might go up and even exceed last winter’s, nothing indicates any severe spike this winter.

Those who heat with natural gas and propane can expect dramatic drops, while electric heat is projected to cost slightly less.

When crude oil prices surged to nearly $150 a barrel in the summer of 2008, heating oil prices rocketed to record levels. In Maine, where nearly 80 percent of households have oil heat, many people signed contracts locking in rates at more than $4 a gallon for the 2008-’09 winter.

Mike Shea, president of Bangor-based Webber Energy Services, said many of his oil customers signed the contracts in panic. Prices were rising fast and people were scared.

But prices plunged as fast as they rose, falling by more than half during the winter – with many homeowners forced to pay the higher contracted prices.

For October 2009 through March 2010, the Energy Information Administration projects the average cost of heating oil will go up to $2.71 a gallon, from $2.63 for 2008-’09 – with average household expenditures up 1.4 percent nationwide. About 8 million U.S. households – roughly 7 percent – are heated primarily with oil, the EIA says.

Heating oil prices have remained relatively low this year and avoided the wild price swings that plagued the market the past couple of years. In Maine, the average price this year has ranged from $2.06 to $2.42 a gallon, according to the state Office of Energy Independence and Security.

“We’ll never get back down to the $1-a-gallon era. But the main thing is, it’s stable,” Shea said. “The volatility and wild swings are difficult for people to plan around.”

Nothing on the horizon suggests sharp price increases in the months ahead. Heating oil inventories are above average and hurricane activity hasn’t disrupted oil production in the Gulf of Mexico, said Neil Gamson, an energy economist with the EIA.

“With the way stocks are now, it looks like even really cold spells shouldn’t present as much of a problem as they could,” Gamson said.

Other heating fuel costs are expected to drop. The EIA says heating costs from natural gas, used by 58 million households, will drop 16 percent nationally. Costs for electric heat, used by 39 million households, are projected to fall 1 percent. Spending for propane, used in 6 million households, is expected to fall 12 percent.

But the tough economy and high unemployment are likely to send millions of Americans to the federal Low Income Home Energy Assistance Program, which helps people with heating and cooling costs. Last year, about 7.5 million households nationwide received funding from the program.

“What I’m hearing about is middle-class families where somebody has lost a job and they don’t have many assets,” said John Wolfe, executive director of the Washington-based National Energy Assistance Directors’ Association.

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