Michigan Soaring fuel oil prices hit home

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Soaring fuel oil prices hit home

Thursday, September 21, 2000

By Shawn D. Lewis and Kim Kozlowski / The Detroit News

Strapped this summer by some of the highest gasoline prices in history, on estimated 443,000 households in Michigan that use oil and propane to heat their homes now face another costly season this winter.

Last September, Elizabeth Murphy paid 99 cents a gallon for oil to heat her Grosse Pointe Woods home. This month, she's paying $1.39 -- a 40-percent increase. "I am not looking forward to paying all that extra money this winter," said Murphy, who is on a budget plan that allows her to pay $95 a month. Although 77 percent of Michigan homeowners, or 2.6 million, use natural gas to heat their homes, Murphy and others who live in older homes must rely on deliveries of oil in the winter. The colder the weather, the more frequently the trucks must make deliveries. "Sometimes, I think maybe I should have switched over to natural gas," Murphy said. "But when I had my furnace repaired, it cost $400 so I decided to stay with the heating oil." Crude oil rose to a 10-year high for the second time this week, after an unexpectedly large decline in U.S. supplies spurred concern that refiners won't be able to make enough heating oil before the weather turns colder. Oil prices are high because supplies are at their lowest levels in 15 years. But an anticipated increase in production by OPEC and non-OPEC producers is expected to significantly reduce the price of crude oil in the next nine months.

OPEC began the first of three cuts in production of oil in 1998 to raise prices, which were about $11 a barrel at the time. In a 2 1/2-year period, oil went from $11 a barrel to $38.80 a barrel. "It's a double whammy," said Doug McIntyre, an oil -market analyst with the Energy Information Administration in Washington. "Crude oil prices are high because supply has not kept up with demand." At the same time, high oil prices are affecting the U.S. trade balance. The trade deficit widened to a record in July as oil imports rose 4.3 percent to $8.4 billion. The volume of imports reached a record 301 million barrels. But if the effects of the current high costs are short-lived, there shouldn't be a significant impact on the economy because the economy is strong right now, said Jeffrey Pillon, manager of statistical analysis for the Michigan Public Service Commission. "That's not to say the effects of the increases in fuel bills will not be felt on homeowners' pocketbooks," he said. Much depends on the winter months. If this winter returns to normal temperatures, residents who use propane gas could pay an additional $209 to heat their homes, Pillon said. Those who use heating oil could pay another $145 over last year's bills. "That makes two assumptions: the weather returns to normal and prices stay the same," Pillon said. "Both could change." Although Michigan has experienced several mild winters in recent years, the National Weather Service's outlook for this winter suggests a return to normal to above-normal temperatures -- about 25 degrees Fahrenheit -- along with normal precipitation levels. The Old Farmers Almanac is making a similar prediction for the southern Great Lakes region: temperatures to average only a bit above normal from November through March, with near-normal precipitation. If the state has a harsh winter, that could prompt home owners to turn up the dial, increasing demand and price. The Gauthier family of Richmond Township finds little solace in banking on a mild winter and is upset with the increases in fuel oil costs.

"This is a killer," Pat Gauthier said. "I blame the government for not foreseeing it and not planning for it. I think they did it to slow down the economy."

http://www.detnews.com/2000/metro/0009/21/a01-123295.htm

-- Martin Thompson (mthom1927@aol.com), September 21, 2000


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