Supplies of distillates in the US have reached their highest level in 27 years. (image: hourlyjuice.com)

Since the beginning of last heating season, huge supplies and low demand have been the norm on the heating oil market. These fundamental forces should have brought extremely low heating oil prices on the New York Mercantile Exchange for the last year or so, even during the winter. But other factors like the strength of the US dollar and ups and down on American stock markets brought on the same unpredictable swings in heating oil prices that might be expected under a different supply and demand picture.

This week, however, supply and demand have come roaring back to the heating oil markets. According to Bloomberg News, Wednesday’s Energy Information Administration petroleum inventory report tallied distillate inventories, a category that includes heating oil and diesel fuel, at 173.1 million barrels, 3.46 million barrels higher than the previous week’s total and the highest supply level since January of 1983.

The biggest supplies of heating oil in 27 years, combined with stock market losses and high unemployment that point to continuing low demand have driven the price of heating oil down by 15 cents a gallon in the last three days, and falling. As one analyst put it, the market is (at least for now) coming to its senses:

“The weekly jobless numbers were disastrous and sent the market lower,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The oil market is facing the reality, which is that supplies exceed demand. The only thing that was supporting prices was a false sense of economic security.”

Tumbling oil prices are always good news for heating oil users, and big supplies and small demand will likely stick around until at least this fall, when cold weather begins to drive demand and prices up. But as any oil price-watcher has learned, sanity in the market rarely lasts long, which means heating oil is just one big stock market day or Middle Eastern diplomatic crisis away from a 15-cent-per-gallon increase. For now, let’s all sit back and bask in the market’s soothing rationality and the cozy lower prices that it brings.

The northern lights over a cabin in conservation-minded Fairbanks, Alaska. (image: alaska-in-pictures.com)

An recent editorial in Fairbanks, Alaska’s local paper the Daily News-Miner congratulates the community on an impressive feat of conservation: reducing heating oil consumption by 25 percent in just four years.

The editorial cited a survey that found average per-season heating oil consumption in Fairbanks fell from 1,099 gallons per household in 2006 to 818 gallons last winter. Additional information about exactly how heating oil users managed to burn so much less was apparently not included in the survey, but the News-Miner article made a good guess:

Cutting usage by that much requires a more efficient furnace, a cheaper alternative heat source, more insulation, better windows, fewer air leaks or significant changes in behavior—or some combination of all of the above.

Some of the reduction can be attributed to homeowners burning more wood, but wood heat users in Fairbanks only increased by 7 percent over the last four years, according to the survey. So it seems that basic conservation methods (like the ones described in our in-depth article on energy-saving DIY improvements) adopted by a motivated community really paid off. Alaska’s extreme cold, the 2008 price spike, and generous home energy retrofit program offered by the state all played roles in the remarkable success. But even without those additional factors, any community in the Northeast or the rest of the country could achieve the same energy-saving triumph.

Fairbanks, Alaska: another energy conservation success story that’s inspiration to heating oil users across America.

Beckett's Aquasmart boiler temperature control. (image: beckettcorp.com)

Every heating oil user wants to use less oil. A gallon of heating oil saved is a dollar (or two or three) saved. In addition to weatherization and utilization of a programmable thermostat, adjusting oil heat systems to burn oil at the lowest possible temperature saves fuel and helps lower heating oil bills.

At the AREE trade show, Jonathan Beckett of RW Beckett walked HeatingOil.com through a product that does just that. Beckett’s Aquasmart boiler temperature control measures the demand on the heating system as it rises and falls with the seasons. In the winter, the control raises the boiler temperature to ensure enough heat is produced to make hot water and keep the home warm. In the summer, the system detects lower demand and reduces the internal boiler temperature to a level that’s adequate to heat water without burning additional fuel to heat the home. The Beckett Aquasmart is available for purchase and installation through heating oil dealers.

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Rumney Memorial School principal Adam Rosen (shown reading to third- and fourth-graders) discovered the benefits of energy audits and weatherization first hand. (image: rumney.org)

From President Obama to Secretary of Energy Steven Chu, many high-profile individuals and institutions have recently touted the energy-saving benefits of weatherization. The simple and inexpensive process of sealing up a house or other structure to ensure it stays warm in the winter and cool in the summer, if done correctly, can seriously reduce energy use and provide huge cost savings just a year after weatherization improvements are made. But should we take politicians’ and bureaucrats’ word on this issue? What do ordinary Americans have to say about weatherization?

To find out, one need look no further than an opinion piece published Tuesday on the Vermont news blog vtdigger.org. Under the straightforward headline “Rumney School used half as much fuel this year because of weatherization,” Principal Adam Rosen of Rumney Memorial School in Middlesex, VT described how a two-day weatherization project at the school led directly to huge savings on heating oil.

Last summer, the elementary school received a grant from the state’s Department of Natural Resources and began the weatherization process. The first step was an energy audit in which technicians examined the school building and identified the best ways to maximize its energy efficiency. Next, “with help from over a dozen hard working local volunteers, in two long days,” energy technicians installed attic insulation and sealed air leaks throughout the building to ensure that temperature-controlled air would stay inside the building and outside air wouldn’t get in.

Finally, the school (without the aid of a grant from the state government) invested in a comprehensive cleaning and tune-up of its oil-fired boiler and heating system: “[HVAC technicians] made suggestions beyond the routine annual boiler cleaning. We repaired thermostats and cleaned the dust off our radiator fins.”

Nine months later, the result of Rumney School’s investments couldn’t be more positive, as Rosen explained:

I had us bid on 6,500 gallons of home heating oil. Well, if we’d had a bone-chilling cold winter, we might have needed that much—as it was, we purchased less than 4,900 gallons of oil, and are going into the spring with a nearly 3,200 gallons in the 5,000 gallon tank. Air-sealing, followed by insulating and boiler maintenance paid off and the school benefited beyond any of our expectations: this year at Rumney Memorial School we used a little more than half the fuel that we used in previous years!

A school that had previously purchased 10,000 gallons of heating oil for one heating season bought just 4,900 gallons and has several thousand gallons left over for next year.

The lesson for heating oil users (and users of other heating fuels as well) is clear: weatherization works! Investing a few hundred dollars in a professional energy audit and appropriate improvements will save you thousands if not tens of thousands of dollars on heating and cooling bills over the future years and decades you spend in your home. Even if you move out of your energy-efficient home, the improvements you invested in will raise its market value. Plus, federal and state grants, incentives and tax breaks can help reduce up-front investment in audits and home improvements to increase savings even more. And let’s not forget the environmental benefits of home energy efficiency; using less energy means decreased consumption of fossil fuels and fewer greenhouse gas emissions.

Energy audits, insulation upgrades, and well-placed caulking are deceptive in their simplicity, but have proven to be astoundingly good investments for those who do them right. So if you’re looking to save some money on your heating oil and electricity bills, the time to invest in a professional energy audit and home energy improvements is now. Given the chance, President Obama, Secretary Chu, and Principal Rosen would all give you a hearty pat on the back for your decision.

On Monday, Gov. Baldacci’s signature put Maine on the path to low-sulfur heating oil. (image: maineinsights.com)

On Monday, Gov. John Baldacci signed into law a bill that would lower the sulfur content of home heating oil in Maine, according to a press release from the governor’s office. The bill would require heating oil to contain no more than 0.05 percent sulfur by weight starting January 1, 2014, and no more than 0.0015 percent by weight—the same sulfur content as ultra low-sulfur diesel—starting January 1, 2018. Maine’s House of Representatives and Senate approved the bill in the last week of March.

Though the bill’s original inspiration sprung from a desire to protect the air in Maine’s Acadia National Park, the governor cited statewide health benefits of the bill as a key factor in his decision:

The resulting cleaner air is good news for all Maine citizens. This is especially beneficial for populations most susceptible to health issues caused by pollution: the young, elderly, asthmatics, and those who have lung or heart problems. Regional health impact studies have suggested that Maine can save nearly $150 million in avoided health costs associated with the implementation of this program.

Legislatures across the Northeast are considering similar bills that would make heating oil a cleaner and greener heating fuel by reducing its sulfur content, adding biodiesel to home heating oil, or both. Maine’s bill, unlike proposals in Connecticut and Pennsylvania, does not require that heating oil be blended with biodiesel.

Low-sulfur heating oil won’t just bring health and environmental benefits to Maine; individual heating oil consumers will see better performance from their heating systems because a low-sulfur fuel burns more efficiently and cleaner, which means that heating systems will require less maintenance. That’s why the Maine Energy Marketers Association—an industry group composed of heating oil, propane, and other energy dealers—joined groups like the Natural Resources Council of Maine and the Maine Chapter of the National Lung Association to support the new low-sulfur standard for heating oil.

"The future of US energy is heating oil," said Pres. Obama to a rapt audience on the grounds of a NJ heating oil storage facility. (image: Nicholas Whitaker via heatingoil.com)

After yesterday’s announcement that the US would expand offshore oil drilling, President Barack Obama dropped another bombshell on the energy world by calling heating oil “the key to America’s future” and pledging to bring heating oil to 10 million more American homes by 2014. To demonstrate his determination on this score, Pres. Obama will be converting the White House to a heating oil system, and dug up the Rose Garden to install a brand-new, 1,000-gallon home heating oil tank. President Obama announced his ambitious plan at a heating oil storage facility in Landon, New Jersey.

As crowds cheered, the President explained the importance of heating oil:

We cannot afford to delay one more day in bringing the citizens of this country the safe, reliable, and affordable heating fuel they deserve. For too long this advance has been held up the partisan squabbles of the past—the time has come to move forward. Heating oil’s high efficiency, low emissions that are getting lower each year, and clear path to 100 percent renewable biodiesel content make it the finest heating fuel in the land. All of America deserves this fuel. We’re starting at the White House, but we’re on our way to your house!

The announcement provoked some flutter in the financial press, as journalists struggled to piece together how heating oil, a close cousin of “oil” oil, was producing so much activity on the trading floor, outperforming metals, gasoline, and crude. Searching for an industry expert willing to explain the frenzy, Bloomberg news could only find the Maine Governor’s Office of Energy Independence and Security:

In Maine, the President’s comments have created a phenomenon. Following the president’s announcement, our office has been flooded with calls from Mainers eager to switch to heating oil for their home heating needs. The excitement has unfortunately led to some unlawful activity in southern Maine, where a band of heating oil marauders is performing involuntary repairs on tanker trucks carrying diesel fuel, flooding the local market with supplies of no.2 oil.

President Obama’s announcement came as surprise to many Americans—especially residents of the West coast and South. Puzzled viewers of the president’s speech in those regions turned to the internet to find out what heating oil is, making “what is heating oil?” the most-searched phrase on Google’s US search engine.

The craze swept the nation in record time, with some citizens driven by their enthusiasm to begin clearing space in their basements and garages on Thursday afternoon to make room for a new heating oil tank.

Following his prepared remarks, the president took questions from the press, and offered some details of how his program, dubbed “Making America Cozier with Oil Heat.” Private citizens will be rewarded with rebates worth 40 percent of the cost of their new oil heat system, including tank and furnace or boiler. New users of heating oil will also receive their first fill-up of the fuel for free, thanks to a cooperative subsidy program administered through the Department of Energy and local state oil dealer associations.

Reached for comment on Air Force One after his speech, the president told HeatingOil.com, “I’m fired up to get more people on board with this great fuel, and I’ll need your help to do it. Keep the good work, and spread the word!”