Heating fuel costs a year-round worry
Many spread out payments, but locked-in prices may end
Every day, Anderson Fuel's sales manager, Frank Smith, puts more home heating oil customers on monthly payment plans, offers energy-savings tips, and fields calls about replacing old heating systems.
Smith said he will do almost anything to help the Scituate company's more than 3,000 customers prepare for what is expected to be a winter of staggeringly high heating bills.
But there's one thing Smith and other dealers doubt they can continue to offer: locked-in prices.
In years past, dealers negotiated low-price oil contracts with regional distributors up to almost a year in advance and purchased insurance to guard against significant price increases.
Customers could lock in a per-gallon price or opt for a plan that capped how much they would pay.
But as the price of a barrel of oil has risen over $145, insurance premiums for dealers have also been rising. With no end in sight, price-protection con tracts have become risky propositions.
"I used to buy this insurance for a nickel [a gallon]. Now it costs me 45 cents," said Smith. "I'm still trying to figure out if it's something I can afford to do."
On Tuesday, Smith was charging $4.65 a gallon for heating oil. If he were to tack on another 25 cents to give himself downside protection - in the unlikely event oil prices drop sharply - it could be too much for customers to handle, he said.
Managing her heating bill has been a balancing act for Virginia Boyle, whose Newburyport home is among the almost one million that use heating oil in the state, roughly 40 percent of Massachusetts households.
Nationwide, 8 million homes, or about 7.5 percent, are heated with oil, according to the Energy Information Administration.
Boyle said her family has already taken steps to conserve oil, including turning down the thermostat, washing clothes in cold water, and weather-stripping windows.
They are also on a payment plan with Townsend Oil of Danvers. Many oil users try to lessen the pain by spreading the cost beyond winter months.
"It started at nine months, then it went to 10 months, now it's 12 months," Boyle said of the payment plan, which cost her family about $210 a month. Two years ago, she was able to lock in a per-gallon price for the season. But Townsend did not offer the plan last heating season, nor will it do so this winter, she said.
Michael Ferrante, president of the Massachusetts Oilheat Council, said he's not surprised that price-protection plans are "basically nonexistent right now." The average oil customer uses between 900 and 1,100 gallons a year, he said, so at $4.50 a gallon, the average bill would be $4,050 to $4,950.
"The prices for home heating oil are historically high because the prices of crude oil are historically high," Ferrante said this week. "Heating oil prices went to almost $4 a gallon at the wholesale [level]. If you're a retail home heating oil supplier, it's going to cost you $4 a gallon before you even add on your overhead cost, or dare I say, profit."
Mark Wolfe, executive director of the National Energy Assistance Directors' Association, said he expects rising home heating oil prices to suck about $800 million more out of the Massachusetts economy next year, based on an estimated $4.50 per gallon average cost in 2009, compared with $3.30 last winter. That means consumers will be paying for their heating with money originally saved for things like swimming lessons for the kids, Friday night dinners out, or vacations, he said.
"For some people, this is their monthly paycheck," Wolfe said. "That's the gloomy picture. How do you adjust to it?"
Teasie Riley Goggin said she and her husband not only use heating oil for their Salem house, but for nine apartments they rent out. "Of course I'm worried, " Goggin said. "Is it going to be necessary to go to your savings account to pay for oil?"
To help customers cope, Scott-Williams Oil of Quincy recently put all of its 4,000 customers on 12-month payment plans, though they can opt out.
"Breaking it up is a much better way to go than doing nothing and then panicking," said president Ken Williams.
Erin Ailworth can be reached at eailworth@globe.com. 