October 4, 2012

Locking into heating oil prices best way to go say dealers

Average cash price for home heating oil was $3.68 a gallon, up 18 cents a gallon from a year ago

By Craig Crosby ccrosby@centralmaine.com
Staff Writer

and Rachel Ohm rohm@centralmaine.com
Staff Writer

Oil prices are going up as fast as the leaves are changing color, and local dealers say the best way to take the sting out of the hike is to lock into a plan early.

"The smart play was already done earlier this year by customers who got on automatic delivery programs," said John Babb, president of Manchester-based J&S oil, which also has an office in Winslow. "The others are trying to speculate and that generally creates a losing proposition."

While opportunities to sign up for the best deals have expired, Babb said there are still options for those who are willing sign up for automatic delivery programs, which allow dealers to buy oil from wholesalers up front and lock in at lower prices.

"Inevitably it tends to climb through the coldest weather and that's when we need the most of it," Babb said. "That's why a good, steady budget plan works best. People paying cash are usually speculating. They usually buy too early or too late."

The Governor's Energy Office found in a survey of oil dealers around the state this week that the average cash price for home heating oil was $3.68 a gallon, up 9 cents a gallon from the previous oil survey in late August and 18 cents a gallon from the same week a year ago, the Associated Press reported.

The lowest prices were in southern Maine, and the highest were in northern Maine, the survey showed.

John Peters, the vice-president of Downeast Energy in Brunswick, which also delivers in central Maine, said that most customers locked into heating plans in June or July, but since that time the company's costs to deliver have gone up about 60 to 65 cents a gallon.

"If a customer were to repeat the process of buying into a price plan now the price would definitely have gone up," he said. "Many of our customers have already bought into plans though, because they like knowing their price will not change as we get into heating season."

He said that state law requires his company to buy enough oil ahead of time to meet the demand of consumers who buy in early and to ensure that costs do not fluctuate in the winter months.

"I really can't speculate about where oil prices are going in the future," he said. "But I would say it is smart for consumers to buy a price-protected plan."

Babb said escalating unrest in the Middle East has had an imact on prices, but he said the bulk of the blame is the federal government's failure to develop responsible energy policies and to rein in corporate greed.

"It's all related to our lack of an energy policy and our financial institutions getting into a betting game with commodities," Babb said.

He said increasing prices are difficult for retailers, who try to soften the blow for customers by cutting into profit margins.

Customers, meanwhile, seem to take the price increases in stride until they hit $4 per gallon. Every time prices go up, that tipping point seems to go a little higher, Babb said.

"I think customers are a bit numb to it," he said. "I think right now it's the $4 mark before people start pulling back as much as they can. We still have to have oil for our homes and fuel for our tanks."

 

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