Mass: Seeking shelter from high oil costs

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Seeking shelter from high oil costs

Homeowners explore fixed-price contracts

By Diana Brown, Globe Correspondent, 9/10/2000

LOUCESTER - When many people were paying close to $2 a gallon for home heating oil last winter, David Morey was burning oil for both his home and business for a mere 82 cents a gallon.

This year, Morey again locked in and prepaid his oil supply at $1.15 per gallon for the coming winter, a time when many industry predictions indicate the price will go back up to $2 .

''Last year, it was fabulous,'' said Morey, who has committed to prepay fixed-price contracts with J.M. Walsh Oil Co. in Gloucester for the last six years, buying about 1,100 gallons for his Lanesville Package Store and 350 gallons for his home, both in Gloucester.

He said he has always beaten the going winter rates by paying up front in the summer - especially last year, when home heating prices doubled from the average $1 per gallon.

Many consumers are bracing for high fuel prices again this year but are strategizing to save money by locking into fixed-price programs, using alternative heating sources such as wood, converting to natural gas, investigating fuel assistance programs or conserving fuel by turning down thermostats, wearing warmer clothing and using less hot water.

Not everybody is a fan of fixed-price contracts. Robert Fawcett, owner of Economy Fuel in Woburn, said the plans can be risky for both customers and companies.

If prices fall below fixed prices, then customers are locked into paying higher prices. If prices rise, then companies can lose money because they are selling at rates that can be lower than what they're paying, Fawcett said.

About 40 percent of Massachusetts homes are heated with oil, and the remainder use natural gas, wood, electricity, or propane gas, according to the Massachusetts Oil Heat Council in Wellesley. Massachusetts follows New York and Pennsylvania, respectively, as the leaders in home heating oil use in the country.

Some people are looking to convert to natural gas but even those prices are expected to rise by as much as 55 percent, according to the US Department of Energy.

Gas companies such as Boston Gas, Colonial Gas, and Essex Gas are offering deals to those who wish to convert.

Others are investigating burning wood as an alternative. ''We're getting a lot of phone calls,'' said Ron Amari, manager of Russell Farms in Woburn. Last year, he said, the business sold 400 to 500 cords of seasoned wood for $189 a cord, a price that has held so far this year.

Fixed-price oil plans seem to be gaining in popularity, however. Janelle Favaloro, president of J.M. Walsh, usually signs up 15 of her 1,800 customers for contract plans, which the company has offered for six years. This year, that number is up to 60 customers, with about three new inquiries coming in a day.

''This is the first year we've had this kind of response. People are really nervous,'' Favaloro said. Several customers locked in at $1.15 a gallon. Now, she is offering a $1.24-a-gallon fixed plan.

''There has been a tremendous increase in price-cap and fixed-price plans this year, but they are not new,'' said Michael Ferrante, president of the Massachusetts Oil Heat Council. And they are a ''very big risk'' for companies and consumers alike.

Brian Galvin, manager of Welch and Lamson Oil Co. in Hamilton, will not offer fixed-rate plans, because even if customers lock in, the company may not be able to meet demand. ''They are only going to get fixed prices if the supply comes in. If you can't get the oil, then you can't deliver it,'' Galvin said, suggesting customers should read their fixed-price contracts to be sure prices and deliveries are guaranteed.

Ferrante concurred that supplies are worrisome. For the last week in August, there were 5.9 million barrels of heating and diesel fuel in New England, compared to 16.3 million for the same time last year, Ferrante said.

As a result, local suppliers like Galvin are concerned that supply may not meet demand, particularly for those who buy on the futures market for fixed-price customers. ''It's another concern in the market, but that isn't reason to push the panic button,'' Ferrante said.

Fawcett, the Woburn oil dealer, is watching carefully to see if prices will actually go up. ''There are good signs that things may soften up a bit, which is good,'' he said.

The 11-member Organization of Petroleum Exporting Countries was expected to meet in Vienna today to discuss increasing production of crude oil, which could help lower the costs.

In March 1999, OPEC cut oil supplies to help boost prices above the average $10-a-barrel crude oil price. That reduction has tripled prices to more than $30 a barrel.

Ferrante suggests homeowners wait to commit to a plan until the results of today's OPEC meeting are announced.

Fuel assistance programs for low- and moderate-income families are also bracing for a big response this winter.

Gloria DiPietro, director of fuel assistance at Community Action Programs Inter-City Inc. in Revere, said the program helps 3,200 people a year in Revere, Chelsea, and Winthrop by offering free heating oil to families that meet certain income requirements. She expects that caseload to climb by as much as 30 percent if prices rise as predicted.

To keep warm last winter, DiPietro said, many people wore more layers of clothing or blankets and used candles and gas ovens for heat. ''We're going to be getting people who are working poor,'' she said. ''They're definitely deciding between groceries and oil.''

Income requirements were adjusted last year so that more families could receive fuel assistance. Now, a family of four making $34,000 a year can qualify, whereas before the limit was $26,000.

Michael McDonough, energy director for Community Teamwork Inc. in Lowell, said his agency serves 7,000 households in 19 communities from Lowell to Arlington. But they could help more.

Many people who got off welfare and went back to work think that they are no longer eligible for programs like fuel assistance, but they are as long as they meet income guidelines. They may receive other benefits, too, such as discounts on other utility bills, home energy audits, and home appliance audits and replacements, McDonough said.

Overall, home heating oil specialists say, conserving energy is one of the best strategies. Ferrante urges consumers to lower their thermostats, reduce hot water use, budget oil bills with oil companies, check window and door insulation, and have oil furnaces cleaned and serviced regularly.

''There's tremendous demand all over the world,'' said Fawcett. ''We as a society have to rein ourselves in.'

http://www.boston.com/dailyglobe2/254/north/Seeking_shelter_from_high_oil_costs+.shtml

-- Martin Thompson (mthom1927@aol.com), September 10, 2000


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