Can a bearish oil market soften the blow for winter heating bills?
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Peter Hirschfeld Vermont Press Bureau - Published: August 20, 2008
The meteoric rise in the price of oil over the past year has been tempered in recent weeks by a similarly precipitous drop. And while state officials overseeing fuel assistance programs welcome the roughly 30-percent fall in crude prices, they say Vermont still faces a potential heating crisis come winter.
Oil fell to about $112 per barrel earlier this week, down from a July 11 high of more than $147. The wholesale cost of No. 2 heating oil on the Nymex exchange, meanwhile, has dropped from more than $4 in July to just above $3 this week. That translates into retail prices of about $3.80, significantly below the $5 per gallon some area dealers were quoting earlier in the summer.
Richard Moffi, chief of Vermont's fuel assistance program, says he's happy to see the long-awaited decrease in prices. But he attributes the drop to low summer demand for petroleum.
"The bad news is that when fall hits, and demand rises, prices always go back up," he says.
Even if prices remain where they are now, he says, many Vermonters still face a daunting financial situation this winter.
"Oil at $3.79 looks like a steal compared to $5," Moffi says. "But for low-income families it's still a budget-buster."
At $5 a gallon for No. 2 heating oil, according to Moffi, Vermont needs $38 million to meet its obligation to households that qualify for fuel assistance. The drop to below $4 per gallon cuts that number by some 20 percent, he says, but it still far exceeds the $11.6 million Vermont currently has in its Low Income Heating Energy Assistance Program coffers.
Moffi says prospects of a federal infusion into the LIHEAP grow dimmer by the day, and that the state's own economic troubles mean lawmakers and administration officials will be hard-pressed to find the money in-state.
"$3.79 is a heck of a lot better, but it's still unaffordable," Moffi says. "And not just for low-income folks, but for middle-income, working-class Vermonters as well."
Matt Cota, head of the Vermont Fuel Dealers Association, told legislators earlier this summer that he anticipated a drop in crude prices. The markets have since proven Cota right, and he says fuel dealers in the state are breathing a cautious sigh of relief.
"This is a roller coaster," Cota says. "It's just so chaotic."
Cota says lower prices, along with newly available federal loans, have blunted some of the concerns this summer over fuel dealers being able to obtain steep lines of credit for their winter fuel deliveries.
But Cota too says prices will need to fall even further before Vermont can truly emerge from crisis mode. Domestic drilling and stopping speculation in the oil markets, Cota says, would bring prices down to a more affordable level.
"I am more optimistic," Cota says. "As we stand now, I'm a glass-is-half-full kind of guy and I'm hopeful prices will decline."
Prices at the gas pump also have been sliding in Vermont. On Tuesday, according to VermontGasPrices.com, the average cost of unleaded was $3.82, the lowest mark since May and down nearly 30 cents from a July 12 high of $4.10.