NH: High prices expected for heating oil

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June 25, 2000 High prices expected for heating oil Sunday News Staff

Home heating oil retailers say consumers are lining up early for winter pre-buy programs even though prices are much higher than they were last summer.

People who signed contracts last summer for winter fuel at Johnny Prescott's in Concord paid about 72 cents a gallon, a real bargain when you consider prices statewide spiked to as high as $1.90 a gallon in January.

This summer, Prescott is offering a winter pre-buy program at about $1.10 a gallon, while everyday pricing is about $1.20 a gallon right now, according to company president Thomas Prescott. "It's becoming more and more popular," Prescott said of the pre-buy plans, an opinion echoed in Hampstead at Duston Oil, where the pre-buy contract is $1.10 a gallon for the winter if consumers pay by July 31. Donna Coffman, office manager at Duston Oil, said there has been a great deal of early interest in the pre-buy program. "We've been getting a lot of calls," Coffman said. Mark Riley, energy program manager of the Governor's Office of Energy and Community Services, is generally recommending pre-buy plans as well and telling consumers they should weatherize their homes, too. "Indications are the price of heating oil is not going to go down significantly," Riley said. He said projections show no significant downward turn in the price of home heating oil for the next five years. Riley said home oil prices statewide average about $1.31 a gallon, an 82 percent increase over last summer's average of about 72 cents. "Here at the governor's energy office, we are encouraging consumers to prepare for price volatility because world crude oil prices remain high and current retail heating prices are still quite high for this time of year. "We want to make sure people are doing the right things to keep their homes warm next winter," Riley said. He said most of the oil retailers in New Hampshire offer pre-buy plans in July. "We certainly think it's a good idea," Riley said of the pre-buy plans. "It adds a little protection and takes away some risk." About 60 percent of all New Hampshire households heat with oil and each household averages about 1,000 gallons a year. "We're trying to be as optimistic as possible, but hope this year people will be better prepared for price volatility. Last year we saw such a big spike," Riley said.

A number of factors played into the winter price hike, including a cold snap and supply disruption. The Attorney General's Office investigated and found no wrongdoing in New Hampshire on the part of dealers or wholesalers.

Mary Ann Manoogian, assistant director for community services at the Governor's Office of Energy and Community Services, said New Hampshire got an extra $9.1 million for low-income fuel assistance on top of the $8.5 million allocated last year. Instead of serving about 17,050 households, the program served at least 23,000 households last winter. Manoogian said she expects level funding of about $8.3 million for the coming winter. "We won't have a clear picture until September or October," she said. On the bright side, the National Weather Service is forecasting a warmer than normal winter, but just how much warmer it's too early to tell, according to Tom Berman, a meteorologist with the National Weather Service

The service's climate prediction center suggests some relief for families concerned about their heating bills, but that could also translate to a downside for skiers who like natural snow. "For December, January and February, the temperature outlook is above normal," Berman said, adding he couldn't say just how much above normal. The average daily temperatures for December range from a low of 14 to a high of 34 degrees; in January, average temperatures range from 7 to a high of 30 degrees; and in February, they average from a low of 10 to a high of 33 degrees, he said. Concord reports on average about 80 inches of snow a year. Above-normal temperatures could mean below-normal snowfall because more of the precipitation would likely fall as rain, Berman said, but it also could translate into energy savings. Bob Garside, president of the Better Home Heat Council of New Hampshire, said the oil pricing problem isn't going away. "This is an issue that is much bigger than local retailers and dealers. This is a worldwide problem," Garside said. Energy prices are still a bargain in the United States, Garside said. He said OPEC met in Vienna on Wednesday and agreed to increase production between 2 and 3 percent. "I don't think in the long run output will keep up with demand," Garside said. He said drilling in the United States hasn't been profitable because of government regulations. President Clinton on Thursday called for opening up stripper wells, which are wells that have been closed because their owners believe government regulations restrict their profitability. "If you look at the world market, there is a tremendous surge in demand. It's been a bargain people got accustomed to. As long as crude oil is $30 a barrel and more, we're not going to see lower prices. I think this coming winter we'll be seeing high prices again. "I don't see us going back to the levels we were accustomed to," Garside said, adding they range anywhere from $1.10 a gallon to $1.50 a gallon. Thomas Prescott believes the problems stem from oil being traded on the commodities market. He met at a Concord forum with Gov. Jeanne Shaheen and U.S. Energy Secretary Bill Richardson in May and found little interest in his concerns. Prescott said that while politicians continue to blame OPEC countries for pricing problems, he believes the problem is linked to the commodities market. Twenty years ago, oil wasn't traded on the market. "I don't think anything the politicians are doing is helpful," Prescott said. "OPEC countries are taking the heavy blame for the price of fuel, but they don't control the commodities market on Wall Street that drives the prices up and down," Prescott said. Prescott said traders only make money on the commodities market if the prices do fluctuate. He would like to see the government regulate the commodities market so oil prices couldn't go lower than $22 or higher than $28 a barrel. "They are not paying any attention. There is a lot of pressure on politicians and they need something that makes them look good. They are skirting the real issues," Prescott said. Allen Pattee, treasurer of Energy North Natural Gas with about 70,000 customers in New Hampshire, said his company will offer a winter pre-buy program in September. Natural gas prices can spike unexpectedly, too, but for different reasons usually related to supply and demand. The bulk of natural gas is delivered through pipelines from western Canada or the Gulf of Mexico, he said. "Anything supply versus demand creates a change in price and recently we have seen prices increasing," Pattee said.

http://www2.theunionleader.com/articles/articles_show.html?article=8508

-- Martin Thompson (mthom1927@aol.com), June 25, 2000


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