Heating Oil Spike Has Northeast On Edge (Two Part Series)(National Public Radio)

By David Sommerstein


Heating Oil Spike Has Northeast On Edge

Morning Edition, August 5, 2008 · It's still hot outside, but Northeasterners are already bracing for the cold. Heating oil prices in the region have almost doubled over last year. Kerosene and natural gas are up, too. Local officials are preparing for what they fear could be a drawn-out crisis this winter.

Outside the Essex County government buildings in Elizabethtown, N.Y., employees Lee Ann Pierce and Katie Cariffe are thinning the flower gardens. But they're already thinking about staying warm in the winter months.

Pierce wishes she could buy a wood stove or move to Florida. She spent $2,000 for heating oil last year, and she doesn't know how she'll afford almost twice that amount this year.

"Right now, it's going to be fly by the seat of our pants and hope we don't freeze to death, I guess," she says.

The women are serious. Gas and food are already too much. Cariffe says she and her husband feel besieged by high prices.

"Both of us drive used cars," Cariffe says. "Now we're looking at: Are either one of our cars going to be able to make it through winter, so we can get to work to buy the fuel? I mean, our mortgage alone is $700 a month."

Tough Choices

Stories like these worry Essex County Manager Cliff Donaldson. Rural towns here — high in the Adirondack Mountains and 50 miles from Canada — are known for punishing winters.

"We're worried about people who are pushed to the edge," Donaldson says. " 'Do I pay for our medicines, do I pay for heat, do I pay for food?' What does that do to them mentally?"

Donaldson has formed a task force to prepare for this winter. Its members are contacting food banks, suggesting the elderly move in with relatives, and planning for temporary shelters for people who can't keep up with their heating bills.

"You get that call in the middle of the night," Donaldson says. "They're out of oil. It's 30 below zero. You've got to have a place to move them."

A Looming Crisis

Across the Northeast, officials are forming similar task forces and warning of a coming crisis. New England governors met in Boston last month.

John Baldacci is the governor of Maine, which has the highest heating oil rates in the country. He says people are anxious. "They're angry about it and concerned about the impact it has on all of our economies," Baldacci says.

All the states expect a big jump in the number of applications for the federal government's Low Income Home Energy Assistance Program, or LIHEAP. The governors implored Congress to nearly double LIHEAP funding over last year, to $5.1 billion. But a bill to do that has stalled in the Senate.

Even if the legislation passes, the money is unlikely to help everyone who needs it. Many people, like the women in Essex County, are above the income threshold. It won't help landlords if they get stuck with heating bills their tenants can't pay.

Massachusetts Gov. Deval Patrick told people not to wait for the government to act and to do what they can to make their homes more energy efficient.

"One simple thing we urge all consumers to do is get an energy audit of their homes, and do it this summer," Patrick says.

Busy Times For An Energy Auditor

Ann Heidenreich does energy audits in Canton, N.Y. Her voice mail's been full lately. She used to reach out to town councils, churches and other groups. Now they call her.

"It's radically ... different," Heidenreich says. "I've never seen anything like this."

New York, Vermont, Massachusetts and other states are offering low-interest loans to help homeowners install storm windows and doors, plug drafty leaks and buy wood or pellet stoves.

But those programs don't change the global price of oil. The biggest variable now is the weather. Everybody fears a deep freeze. If that happens, says Heidenreich, the region could face a season-long crisis.

"It's the whole winter," she says. "And the long emergency is gonna take a whole lot more planning, thinking, being there for people who need help."

Officials across the Northeast agree that if they wait for the first cold snap to plan for this winter, it'll be too late.


Distributors Feel The Heat Of Oil Price Jump

Morning Edition, August 6, 2008 · With heating oil prices projected to possibly double what they were last year, homeowners in the Northeast are bracing for a budget-stretching winter. So are the people who deliver the oil. Most are small-business owners caught in the middle between global oil traders and anxious customers.

They're known as "fuel jobbers," mom-and-pop businesses that deliver oil, propane and kerosene with just a few trucks.

Steve Kuno, a distributor in northern New York state, was a linebacker in college, and at 47, he looks like he still could be. After graduation, a family friend got him work with a fuel jobber and he never looked back. He founded Kuno Oil Co., or Kunoco, in the late 1980s.

Kunoco's "world headquarters," as Kuno likes to say, is a little concrete bunker on the outskirts of the village of Canton, N.Y.

A receptionist, Terry Hamilton, says many of Kunoco's 2,000 or so customers are already calling about the price of heating oil.

How High Will Prices Go?

"They're scared," Hamilton says. "They want to know how high it's gonna get because they're hearing a lot of things. People are talking outrageous numbers, and they want to know if it's true."

The prices are hard for Kuno to believe, too.

"In the early days of my career, if a price moved half a cent or penny on a day, that would be probably a lot," he says.

These days, the wholesale price can swing 15 to 20 cents in a day. Unlike electricity or natural gas, heating oil isn't regulated.

So Kuno uses daily faxed price quotes and glances at the oil markets to make a huge decision: when to buy a tanker of oil worth up to $50,000. While his customers expect grace periods and budgeting programs to make their payments, Kuno has 10 days to pay his suppliers — no exceptions.

"If you're within terms, you can pick up oil, and if you're not, you can pound salt," he says. "And that's just the way it is. I hope we never get to that point and have to deal with our customers that way, but that's the way it is on the other side of our business."

Small Business, Big Gamble

As the price of oil climbs, Kuno also is squeezing his profit margin to keep his price in line with his competitors. This is why oil distributors across the country are teetering on the edge. The government is offering more federal loans to help small distributors stay afloat.

Of the 8,000 heating oil dealers nationwide, almost all are small businesses like Kunoco. Mike SanGiovanni edits the Oilheating Journal. He says the price volatility makes them vulnerable this winter.

"They may be buying oil at a higher price than they can sell it for or, more likely, the customer simply can't afford to buy it," SanGiovanni says. "So now they have oil they have to pay for and they can't get rid of."

Some dealers in the Northeast went belly up last winter. If more follow, they'll leave customers — some with pre-paid contracts — literally in the cold.

Bill Howard, one of Kunoco's customers, says he trusts the company and doesn't blame it for the high prices.

"No, it's not the oil company's fault," Howard says. "It's the … refineries."

Kuno says, "I think that they understand that we're the middleman in this."

Placing Blame

There are lots of targets to blame for high oil prices, Kuno says. He fingers oil speculators. Meanwhile, he says he's already looking beyond oil.

"We have probably another 10 to 20 years at least of life as we know it in the fuel business," he says.

Kuno starts talking about hydrogen and biofuels. He already owns five convenience stores and a food prep business because they bring in non-oil money. So Kuno is confident. He says diversifying will be the best way to ride out the winter.

Energy-Saving Tips

  • Turn your water heater to the warm setting (120 degrees Fahrenheit).
  • Make sure your water heater has an insulating blanket.
  • Consider replacing incandescent lights with compact fluorescents (CFLs), which can save three-quarters of the electricity used by incandescents.
  • Check the age and condition of your major appliances, especially the refrigerator. You may want to replace it with a more energy-efficient model before it dies.
  • Clean or replace furnace, air-conditioner, and heat-pump filters.
  • Caulk very leaky windows.
  • Insulate hot water pipes and ducts wherever they run through unheated areas.
  • Seal the largest air leaks in your house — the ones that whistle on windy days, or feel drafty. The worst culprits are utility cut-throughs for pipes, gaps around chimneys, gaps around recessed lights in insulated ceilings or unfinished spaces behind cupboards and closets.
  • Install a programmable thermostat to lower the heat automatically at night.
  • Schedule an energy audit (ask your utility company or state energy office) for more expert advice on your home as a whole.

Source: American Council for an Energy-Efficient Economy