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What those customers are finding
might come as a shock. The average price of heating oil in Rhode
Island was $2.439 a gallon on Monday, a penny short of the all-time
high reached a week earlier, according to the State Energy Office.
That's 46 percent higher than the price of $1.669 a year ago,
and 66 percent higher than the price of $1.469 two years ago.
What all these numbers mean
is that it's going to cost more for heat this winter. The Energy
Information Administration, part of the U.S. Department of Energy,
projects heating oil bills will be 16 percent higher this winter
than last winter. That's on top of a 34-percent increase in
heating costs last year.
The Energy Information Administration's
projected average price for the Northeast this winter is $2.223
a gallon, compared to $1.92 last year. At today's price, a heating
oil customer that uses 1,000 gallons would pay $2,223, or $303
more than the $1,920 for heat last winter.
Heating oil, like other petroleum
products, has risen to record levels in response to the steep
rise in crude oil prices.
Crude has been pushed higher
by strong growth in China, India and North America, economists
have said. Continued demand, coupled with limited refinery capacity
in the United States, has pushed energy prices, adjusted for
inflation, near the record highs of 1981.
Crude is the main component
in heating oil. At current market prices, crude alone accounts
for $1.60 of a gallon of heating oil, according to John Felmy,
chief economist for the American Petroleum Institute in Washington.
The retail price includes refining, transportation and delivery
costs.
The issue is on the minds of
many New Englanders, who account for most of the heating-oil
consumption in the United States. The New England and Middle
Atlantic states consume 82 percent of the country's home heating
oil, according to the U.S. Department of Energy.
About 42 percent of Rhode Island
households, or 172,000, heat with oil, according to the 2000
U.S. Census. About 46 percent use natural gas.
High oil high prices have translated
into price caps and price locks offered by local oil dealers
that seem stratospheric.
For example, Petro, the largest
oil dealer in Rhode Island, told a customer yesterday that its
price cap -- the highest amount a customer will pay -- was $2.739
a gallon. That's almost $1 a gallon higher than last year's
price cap of $1.899 for the same customer.
Some oil dealers say there has
been more interest in price-protection programs this year because
of the uncertainty of oil prices.
There are typically two types
of programs offered. A "price lock" is a fixed price
per gallon of oil that a customer agrees to pay for the coming
winter. Participating in a price lock protects a customer if
prices rise above the fixed amount. But the customer could wind
up paying more than the market price if heating oil drops.
With a "price cap,"
a dealer agrees to sell oil at a maximum price. But if the market
price of heating oil declines beyond a certain amount, the customer's
price will drop, too.
Price caps are often 10 cents
to 15 cents a gallon higher than price locks because dealers
have to buy options -- a kind of insurance -- in case the price
of oil declines.
Some dealers charge an enrollment
fee to participate. Most dealers also require customers to sign
up for a service contact, and to either prepay for the season
or agree to a monthly budget payment plan.
Victor Allienello, owner of
East Providence Fuel Co., said that about 50 percent of his
customers are opting for a price protection program this year,
compared to 43 percent last year.
"Nine of 10 phone calls
we get every day, people are looking," Allienello said.
"They're asking, 'What are you offering your customers
as a price cap this year?' "
Allienello and other dealers
said they haven't set the price caps yet.
"We're still out buying
our options and barrels for the upcoming season," he said.
Brennan, another oil dealer,
said his company has already closed participation in a price-cap
program offered earlier this month. The price was $2.29 a gallon
for pre-payment; and $2.42 for budget plan payments. This week,
the same plans were available at 20 cents a gallon more.
"Response has been more
than overwhelming," Brennan said.
Woods Heating Service in East
Providence automatically enrolls almost all of its customers
into a price-cap program, said Carl Benker, a co-owner of the
company.
The company won't know its capped
price until mid-September, Benker said. Woods hired a New Hampshire
firm to buy and sell its oil contracts and options for this
winter. It began buying oil in April and will continue through
September, he said.
The company has changed its
budget payment plan, stretching it out to 12 months from 10
months to help ease the big price increases.
Heating costs this winter are
expected to be especially difficult for low-income families,
according to Mark Wolfe, executive director of the National
Energy Assistance Directors' Association in Washington.
That's because Congress has
not increased funds for the federal Low Income Home Energy Assistance
Program, or LIHEAP, he said. A Senate appropriations bill establishes
the level at $2 billion, the same as last year, while a House
version cuts funds by $200 million, Wolfe said.
"Both bills act as if energy
prices haven't gone up," Wolfe said.
"What you're seeing is
a gradual erosion of the purchasing power of heating assistance."
The average grant nationally
last year was $313, and in previous years, that was enough to
pay about half the heating costs for a typical low-income family.
Now it might cover a quarter.
He expects more people to seek
assistance this winter. The association is worried that some
people, particularly senior citizens, will lower the heat to
cope with higher bills, putting their own health at risk, Wolfe
said.
"There's a a lot of quiet
suffering that goes on," he said.
Elia Germani, chairman of the
Rhode Island Public Utilities Commission, also predicts that
many will struggle this year with high heating costs.
"Whatever problems they
are having meeting their bills is going to get worse in the
future," Germani said.
Germani said that a significant
increase in assistance funding is needed.
"The states may have to
get involved, whether its through mandated percentage of income
programs, or state appropriations."
A bill that would have created
a heating assistance program for the poorest Rhode Islanders
died for the second consecutive year in the General Assembly.
The bill would have added a surcharge onto the bills of gas
and oil customers to pay for the program. |
