Higher Heating Oil Prices Forecast For Winter

Posted by Jackson Stone on September 21, 2011 at 4:51 am

Heating oil prices are tipped to rise on burgeoning world oil demand and the on-set of the US winter. (image: csmonitor.com)

Millions of home heating oil customers are bracing for higher costs as the US winter approaches.

The US Energy Department is forecasting heating oil prices to rise further in coming months on the back of strong international oil demand and colder weather.

A spokesman for the Energy Information Administration says the agency predicts the national average to rise to $3.93 per gallon in October, an 83-cent increase from that time last year, wgrz.com reports.

“Although the US economy has not been doing very strongly, the economies in developing nations such as India and in the Middle East have been doing very strongly and they’re sucking up a lot of the world’s additional supplies of oil,” spokesman Jonathan Cogan said.

Across the country, about eight million households rely on heating oil to warm their homes, patriotledger.com reports. In the Northeast – the nation’s biggest heating oil-using region by far, prices are already on pace to put a dent in people’s budget.

A New York State Energy Research and Development Authority (NYSERDA) survey of oil dealers found last week’s average per-gallon price for home heating oil was $3.83 – a 34 percent increase on the same time last year. Further likely increases mean more pain for heat fuel consumers and heating oil dealers alike.

Many homeowners are now considering locking in prepaid contract prices for winter before temperatures dip and prices soar. But some dealers are refusing to offer prepaid oil contracts because they believes prices will actually level out soon and they don’t want to leave their customers out of pocket.

“Actually, we’re not offering a lock-in this year because our suppliers are advising us that the prices are on a downward trend,” said Steven Cianflone, vice president of N & S Fuel in Hawthorne, Westchester County. “There’s just a huge inventory and most of these increases are just man-made. People taking advantage of the system.”

Others dealers recommend customers enrol in a payment plan to guarantee consistent heating oil bills throughout the year.

Last winter temperatures fell to record levels and heating oil costs spiked. Coglan says early winter temperatures could influence this season’s prices, dictating how tough things are likely to get financially for homeowners and oil dealers.

“Particularly important is what happens in the first part of the heating season,” Cogan said. “If we have a mild start to the heating season, that would bode well for consumers but if we get hit hard with the cold weather at that point, that could influence the market as we go through the rest of the season.”

American Petroleum Institute spokesman Bill Bush said world crude prices and international instability influenced domestic heating oil prices here in the US.

Crude is purchased on international markets. So you’re looking at what all the countries in the world produce and consume. You are looking at international factors like unrest and political instability which can affect crude prices.

He pointed to the civil war in oil-producing Libya and conflict in Egypt as examples.

Oil market volatility has made it notoriously difficult for retailers to predict if their consumers will have to brace for a particularly tough winter.

“Are we bracing for it? Not really. It is what it is,” said Patty McGrath, vice president of Economy Fuel in Peekskill. “It’s probably going to be slightly higher but everything is a guess. We really don’t know.”