Lower crude prices warm Mass. homeowners

Heating oil is down 67 cents since peak, and could go lower

The winter ahead might be a little less chilling for Massachusetts residents who heat their homes with oil. The average price per gallon has fallen 67 cents since it peaked at $4.71 in July, according to the state Department of Energy Resources.

And it could drop even more. With Hurricane Gustav causing virtually no damage to oil rigs off the Gulf Coast, oil traded lower yesterday on the New York Mercantile Exchange, falling $5.75 to $109.71 a barrel. The Massachusetts Department of Energy Resources yesterday logged the average price of home heating oil at $4.04 a gallon - up 2 cents from mid-August. But energy resources commissioner Philip Giudice said he expected to see local prices soon resume their decline to reflect the post-Gustav slump in wholesale prices.

"It hasn't gone through to retail prices [here] yet. It should soon," Giudice said, "but there's also [Tropical Storm] Hanna and whatever else happens after her. So it's all a gamble."

Even with lower prices, the state's oil heat customers are paying far more than they were last September, when oil cost about $2.70 a gallon, according to an energy resources survey.

Still, lack of upward pressure from Gustav on fuel prices came as a bit of a surprise to at least one heating oil watchdog.

"I think the industry was concerned, especially when we saw it [Gustav] bearing down on refineries again. We had visions of Katrina," said Michael Ferrante, head of the Massachusetts Oilheat Council, a trade association for heating oil and petroleum product companies. The decrease reflects the market "reacting to the good news," he said.

Ken Williams, of Scott-Williams Oil in Quincy, said he believes the buildup to Gustav was just a "detour" for prices that he's seen dropping continuously for the past few weeks.

"The market paused on the way down to see what was going to happen," Williams said, "and so far it seems like nothing dramatic did happen."

Williams attributed lower prices to people cutting back on fuel use across the board.

"There's an old saying: The surest cure for high prices are high prices because they kill demand," he said.

Consumers are also getting a bit of a break at the gas pumps.

For the eighth straight week, gasoline prices in Massachusetts dropped, falling another 2 cents, according to AAA Southern New England. A gallon of regular unleaded fuel now averages $3.61, 8 cents lower than the national average, but still higher than at this time last year, when the average was $2.68.

"It was surprising to some degree that crude oil dropped," said Arthur Kinsman, a spokesman for AAA Southern New England. "Back in April or May just a suggestion of a storm or a dust-up with Iran or Iraq would cause prices to spike, but there's been a real resistance to that in the last few weeks."

Despite the drop in fuel prices, Giudice, the energy resources commissioner, warned that consumers should still attempt to cut back on fuel consumption in anticipation of a cold and costly winter because prices are still much higher than in recent years.

"It doesn't change the fundamental picture for a lot of folks, which is we've got to become as efficient as we can because it's going to be painful for a lot of people," Giudice said. "For many people, the question will be food or fuel."

Erin Ailworth can be reached at eailworth@globe.com.