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Price Of Oil: Will Politicians Feel Heat From Strapped Customers?

The following post is from cnbc.com features writer Ken Stier.

Worker hauls his hose back to the truck after delivering home heating oil.
Worker hauls his hose back to the truck after delivering home heating oil.

It’s a harbinger of the new energy and possibly even a new social paradigm.

Millions of Americans are facing energy shut-offs of basic heating and electricity services because they have fallen behind their utility bills, the New York Times usefully reported Fridayin a story that deserved front page play rather than on page 16.

It comes just when public support for the most hard-pressed among us is being slashed.

But it is not the just poor Americans feeling the pain. A widening swathe of the once great middle class is being painfully squeezed in a vortex of (perhaps permanently) higher gas, electricity, and food prices.

For Mark Wolfe, executive director of the National Energy Assistance Directors’ Association(which represents state energy aid officials in D.C.), the prospect of record shut-offs threatened a cardinal principle of the American social contract: universal public utility service.

“The whole concept here is universal service--everyone can afford electricity--that’s been the whole mantra for our entire life. You could be lower middle class in the U.S., you can afford a car, buy gasoline, adequately heat and cool your home, but we are now at a point where people are beginning to question that,” says Wofle.

It’s a jarring assessment but maybe exaggerated. Look at our fraying safety net. Close to six million American households are set to receive federal support for heating bills. That’s a 15 percent increase since 2003, when funding grew only 10 percent.

That would not be big problem, if energy prices were relatively stable. But as they soared, the purchasing power of the program Wolfe represents has been severely undermined.

Compounding matters, the Bush Administration is requesting less money for next year--almost 50 percent less than in 2006. The cuts could freeze out 1.2 million households. Few states could make up the shortfall.

Even these figures understate the yawning unmet need. As states tighten their eligibility requirements to provide declining aid to fewer of the most needy, others are simply factored out, just as those no longer seeking work are dropped from the ranks of the unemployed. Are any monkeys being fooled here?

A fight over funding is brewing in Congress next month but it is unclear if the Democrats have the votes to overcome a threatened presidential veto. Utilities, easily demonized in this scenario, will probably favor expanding support.

They are in a tight position. These days every business expects to get paid on time. Utilities, by law, are required to have more patience. But that’s changing, as unpaid invoice backlogs blot balance sheets utilities are launching more aggressive collections. It’s a real concern for utilities; if your customers can’t afford the bill, you’ve got a problem.

At the same time, record shut-downs may not be politically realistic, says Wolfe: “You can’t have a situation where 5-10 percent of the population is cut off from power. I mean, we are not a Third World country.”

That’s true for most of us but it may feel otherwise for an increasing number of Americans.

Higher prices are quickly impoverishing the lower middle class. Since they make up a third of the U.S. population it is a misfortune that’s bound to have economic and political consequences.

And Wolfe says: “We have never had a situation like this and we have nothing that addresses this in a meaningful, immediate way. We have worked really hard to help people into the middle class but now the whole policy is blowing up, and it’s happening so fast. That's really scary.”

Typically Americans buy their first tank of heating oil in mid-autumn; this year that will be right around the time of the presidential elections.

Questions? Comments? energysource@cnbc.com