Comfort Line - Questions and Answers

What caused heating oil prices to spike this past Winter?

There were several factors that converged to cause the price spike. First, the oil producing nations of the world reduced production, causing crude oil prices to increase from $10.00 a barrel to approximately $30.00 a barrel. Second, because of "just in time" inventory methods, refiners carry less inventory than they did years ago. When the weather stayed cold for a number of weeks, inventory levels were depleted, causing upward pressure on prices. A third factor was that natural gas companies could not supply all of their customers due to shortages. The "interruptible" gas customers were forced to switch from natural gas to heating oil. Industry estimates indicate that during the extreme winter weather, this increased demand for heating oil by as much as 25%, further straining supplies and causing a temporary price increase.

What's being done to prevent this type of price spike from occurring again?

The government and the Board of Public Utilities are examining the effect of interruptible gas customers on the price spike. These interruptible customers are given a bargain basement gas price because the gas company can require them to switch to heating oil during cold weather. It is possible that restrictions will be placed on the ability of the gas company to require interruptible customers to switch to heating oil. In addition, the federal government is considering setting up a heating oil reserve to even out supplies during extremely cold weather.

Did the oil heat industry make more money during the price spike?

The major refiners, like Texaco and Citgo, made more money since they sold heating oil for as much as 50 cents per gallon more than gasoline. However, retailers, like Hart & Iliff, did not make more money. We need to maintain a certain, margin to cover our costs regardless of what the price is. In fact, the price spike adversely affected our profits since it reduced our cash flow, increased our receivables and otherwise increased our cost of doing business.

Do you wait to make deliveries until the price is the highest?

Absolutely not! Deliveries are made using an Automatic Degree Day Delivery System. The colder the weather, the more fuel you use to keep your house warm. Degree Days are a daily measure of how cold it is outside. They are listed every day in the weather section of your newspaper. Each day we compute your daily fuel consumption by multiplying the number of degree days times a unique "burn rate" factor, developed for each customer. When our computer estimates that your tank is approximately 70% empty, it will generate a delivery ticket, which is then forwarded to our Delivery Department. For many of our customers with large tanks, we intentional short-filled their tanks this winter so that we could finish filling them in the spring and summer when prices are usually lower.

What can I do to protect myself against winter price spikes?

There are several things we suggest. When prices are low, in the summer or the fall, let us fill your tank even though you won't be using the oil until the winter. Also we have two programs that can help to smooth out and reduce your energy bills. The Guaranteed Price Program allows you to purchase your winter fuel in advance, during the summer, at a low lock-in price. The Even Payment Plan allows you to spread your annual fuel bill over a 10-month period. You will also receive 3.4% annual interest on monthly credit balances and for the upcoming heating season, a five cent per gallon rebate. For more information about these programs, see the related article or call our office.

Properly maintaining your equipment and installing extra insulation, clock thermostats or boiler temperature modulating controls can reduce fuel consumption and save money. If you have old equipment, you might consider replacing it. A new burner can reduce your annual fuel bill by 10-15% and a new boiler by as much as 35-40%.

How do oil prices compare to natural gas prices?

A recent study by the Energy Research Center shows that after the recent oil price increase, heating oil still costs less than natural gas in the 13-state Northeast region. In addition, home heating oil has cost substantially less than natural gas for more than 15 years. Furthermore, over the past five years, homeowners in this region saved an average of $819.00 by using heating oil instead of natural gas.