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Oil heat bills are expected to soar

By Erin Ailworth
Globe Staff / October 13, 2011

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Households that heat with oil are expected to spend a record amount this winter to stay warm, with bills projected to rise nearly $200 over last year, according to a federal forecast released yesterday.

The US Energy Information Administration said the nation’s heating oil customers - most of whom live in the Northeast - will probably pay more than in any previous winter as heating oil costs rise to an average $3.71 per gallon. The average household is estimated to spend nearly $2,500 between now and March.

The biggest reason for the increase: the rising price of a barrel of crude, the main component of heating oil, as demand rises in emerging markets such as China and the Middle East.

“Crude prices haven’t really been this high [before] going into the winter,’’ said Chris Lafakis, an economist with Moody’s Analytics, a forecasting firm in West Chester, Pa.

During the past few years, heating oil prices have been higher, but in the summer months, usually dropping before winter hits. Prices hit record highs in the summer of 2008.

Any increase in heating oil prices has the potential to strain already cash-strapped residents in the Northeastern states, which account for 80 percent of the nation’s households that heat with oil.

People are streaming into Action for Boston Community Development Inc., an agency that funnels state and federal heating assistance to needy families in Boston, Brookline, and Newton. The agency has already received 12,000 applications for assistance.

“We have more people coming in than last year because people are poor,’’ said president John J. Drew. “People are running out of unemployment, they’re getting kicked off welfare, they’re unemployed and underemployed.’’

Hyde Park homeowner John Murphy, a 68-year-old with advanced prostate cancer, said he depends onheating assistance during the winter to help stretch his annual income of about $18,000 from Social Security disability payments. Last winter, his heating bill totaled $1,600.30 - mainly to heat the one room he spends most of his time in.

“You take out another two hundred bucks, I’ll have to cut back somehow,’’ said Murphy, who keeps his thermostat at 68 degrees during the day, then lowers it by four degrees and sleeps in long johns and socks.

But, he added, “I don’t really know what I can cut back on. I’ve got my groceries down to a minimum, [and] I can’t cut back on electricity. I’ve already done that. I can’t put the thermostat any lower. I can’t do 60 [degrees] where I walk around with a pair of mittens.’’

Low-income families and individuals like Murphy could be hit even harder because funding for heating assistance to them is likely to be cut in half. The Low Income Home Energy Assistance Program was allocated $4.7 billion last fiscal year - after much debate among legislators and several delays - giving the poorest families in Massachusetts a maximum of $1,090 in aid. This fiscal year, the Obama administration is requesting about $2.6 billion in such assistance, meaning that the amount of financial help the poorest families could get would fall by about half.

“If the benefits are as low as I think they are going to be . . . the vast majority of people who are looking for assistance from us will have used all of their benefits by Christmas,’’ Drew said.

Last winter, about 250,000 households received heating assistance. Drew’s agency said itexpects that number to grow by about 10 percent this winter, as it has for the last few years, because of the weak economy.

Heating oil dealers across the state have been working with customers to establish reasonable heating budgets and payment plans in advance of the worst winter weather, said Michael Ferrante, president of the Massachusetts Oilheat Council, a trade group for the state’s heating oil dealers.

“No matter what your income, higher heating bills are painful,’’ Ferrante said. “I think what’s happening with [the federal oil assistance program] is symptomatic of what’s happening in Washington. They’re looking at every entitlement, every program that can be cut to reduce the deficit, but people suffer.’’

Erin Ailworth can be reached at eailworth@globe.com. Follow her on Twitter @ailworth.