Americans Scramble to Lock in Heating Oil Prices
Americans looking past a painful summer at the gas pump toward next winter are scrambling to lock in heating oil at current near-record prices for fear of a worsening energy spike — but the dealers aren't offering.
Trade associations say pre-buy programs traditionally offered by dealers in May and June to lock in prices for consumers are nowhere to be found as oil prices continue to shatter record after record as part of a six-year rally.
"Consumers are calling retail heating oil dealers asking for advice," said Michael Ferrante, President of Massachusetts Oilheat Council. "They're looking for one of these programs that cap or fix prices, and they're just not available now."
Average U.S. residential heating oil prices hit an all-time high of about $3.85 a gallon last winter — up 55 percent from the previous year — due to surging crude oil prices and a big decline in inventories in the Northeast, the top consuming region in the United States.
And, even as sweltering summer weather and record gasoline costs push home heating concerns to the background, heating oil futures continue to scale new peaks — a sign of further hikes at the retail level that some experts say could bring prices over $5 a gallon.
Heating oil futures — a gauge of wholesale prices — traded on Wednesday on the New York Mercantile Exchange near the all-time high of $4.0338 a gallon hit May 22, and some analysts forecast higher levels.
"If the market corrects, you may see (pre-buy) programs," said John Maniscalco, the executive vice president of the New York Oil Heating Association, which represents fuel retailers. "But, right now, not too many are offered."
High energy costs have battered U.S. consumers already struggling with the wider housing and credit crisis, and motorists already have showed signs of changing behavior as pump prices rise.
Oil prices have been rising since 2002 as supply struggles to keep pace with an explosion in demand from emerging economies like China. Prices have jumped 40 percent this year alone as investors pump cash into commodities as a hedge against the falling dollar and inflation.
"It's 95 degrees here, there's no demand and plenty of supply. What's driving the (heating oil) price? It's speculation. That's why we feel handcuffed," Ferrante said.
Some distributors are recommending customers start 12-month budget programs to pay a monthly fixed rate and balance out at year end as homeowners struggle to lock in deals.
"How can you lock in a number over $4 a gallon and feel good about it? But it looks like we're going to $5 ... it looks like it's going to get worse, so it is difficult," said Peter Beutel, an analyst at Cameron Hanover in Connecticut.