Staying warm will be costly

Sunday, September 17, 2000

By Cindi Lash, Post-Gazette Staff Writer

For a month now, Dave Gourley and the rest of the folks who deliver heating oil to customers of Blazczak's Home Heat have been starting each day early and heading home late.

Steve Blazczak, owner of Blazczak Home Heat, delivers fuel oil to the Russellton home of Elizabeth Yourish, right. (Lake FongPost-Gazette)

With the price of heating oil at its highest point in years, companies have been swamped with orders from customers who fear the price of oil may shoot still higher. For Gourley and other employees of the Gibsonia heating oil company, meeting that boom in orders has meant a slew of days filled with delivery trips.

"We're working from 7 in the morning to midnight most days," Gourley, 60, said last week while he scheduled still more deliveries for worried customers who'd kept his office telephone ringing all day.

"We've been [keeping up] so far, but we're just on the edge. And we see our competitors' trucks running around on the roads, too. The prices are up, so the panic is on."

Never mind that daytime temperatures of late around Western Pennsylvania have required no more than shirtsleeves and that nary a patch of frost has coated lawns and gardens at night.

Citing fuel prices that are continuing to rise, analysts and energy-industry officials are forecasting that the coming winter could be the most expensive in years for people who heat with oil or natural gas. Those forecasts are prompting Gourley's customers and others like them to do what they can now to avoid paying more later.

People who use oil or natural gas are likely to see their bills rise this winter by 30 percent to 40 percent more than they paid during the same period last year, experts predict. And if the season is chillier than the past three mild winters, consumers could be in for a jaw-dropping case of sticker shock when they open their bills.

That's because seasonal demands for natural gas and heating oil are rising at a time when stockpiles of both -- for different reasons -- are unusually low.

In recent years, natural gas has fetched relatively low prices from brokers, utilities and industries, even though it's the No. 1 heating source in the United States, said John Cogan, a spokesman for the U.S. Energy Information Administration, which compiles statistics and analyzes energy issues.

In the past decade, the average annual price for 1,000 cubic feet, or MCF, of natural gas had been about $2, he said. As a result, natural gas companies quit drilling new wells, quit storing large amounts of gas and laid off employees, who found other jobs.

But as the U.S. and world economies continued to grow, demand increased for electricity to power factories and industries. Heat waves in the Southwest and other regions put more pressure on electricity-producing companies to produce "juice" for air-conditioners, fans and freezers, Cogan said.

Those utilities, which usually rely on coal, were forced to buy supplies of natural gas as well to power turbines needed to generate more electricity.

"Gas started fetching a good price from electric generators, so gas that would have been injected into storage for the winter went instead for electricity," Cogan said. "We had low inventories at the time the demand started going up [for heating]."

With stockpiles dwindling and customer concern growing, the price of natural gas has been rising, reaching $5.09 per thousand cubic feet this week on the New York stock exchange. In Western Pennsylvania, companies that provide natural gas for heating purposes aren't paying quite that much for gas from their suppliers, but their prices, too, are continuing to rise.

A year ago this month, the price for 1,000 cubic feet of natural gas was about $3.30, said Equitable Gas Co. spokesman Randall Crawford. This month, the price was $4.34, and it was expected to keep rising, he said.

Last winter, the average monthly bill for gas, delivery and other costs was around $80 for customers of Columbia, Equitable and Dominion Peoples, the companies that provide gas in Western Pennsylvania.

Gas companies pass along price increases to customers, although they are not permitted to mark up the price they charge. After analyzing the rate and amount of recent increases, officials at Dominion Peoples say their customers may see winter monthly bills rise at least 15 percent over last year's bills.

Columbia and Equitable officials are predicting increases of 25 to 30 percent. All three companies expect to seek a quarterly rate increase from the Public Utility Commission in October.

Only about 10 percent of the nation's homeowners use heating oil, and a third of them are in the Northeast. They, too, can expect increases due to low inventories at a time of increasing demand.

With gasoline prices so high through the summer months, refineries found it to be more lucrative to turn barrels of crude oil into gasoline than into relatively cheap heating oil. As a result, national heating oil reserves are about 37 percent lower than they were at this time last year, Cogan said.

"Now we're playing catch-up with heating oil," he said. "That's cause for concern because inventories in hand provide a cushion when there's a sudden demand. Without that cushion, there's more possibility for price spikes or volatility."

From October to December last year, a gallon of heating oil sold for about $1. This year, it's already up to about $1.30 in Western Pennsylvania and it hit $2 last week on the other side of the state, according to John Zinkand, executive vice president of the Pennsylvania Petroleum Marketers and Convenience Store Association.

The last time prices were that high was in 1990, during the Persian Gulf War, Zinkand said. Usually, the 1.2 million homeowners in Pennsylvania who rely on heating oil aren't worrying about filling their tanks until later in the fall. But this year's rising prices are prompting them to stock up before the price again goes up.

Increasingly, customers are agreeing to buy their winter supply of oil at today's price, gambling that they'll come out ahead if prices continue to rise. For years, oil companies have offered deals that allowed customers to lock in a price for a season's supply, but they found few takers when prices were as low as 60 cents a gallon.

The few homeowners around the region who heat with electricity shouldn't be affected because coal, which remains cheap, is used to generate most of that electricity and because rates are capped by the PUC, utility spokesmen said.

While there is no actual shortage of either crude oil or natural gas, it will take a while for producers of both commodities to gear up production and start replenishing stockpiles. Prices won't likely start to drop until that happens.

Weather, too, presents a variable that analysts can only try to assess.

Officials at the Energy Information Administration, after reviewing average temperatures for the past 30 years, are expecting a colder winter than the past three have been, Cogan said.

But the National Weather Service, after analyzing patterns in the jet stream, temperatures in the sea and other climate factors, expects temperatures to be about 10 percent higher than normal in December, January and February, weather service meteorologist Lee Hendricks said.

"More than anything, prices will depend on the weather," Cogan said. "If we get another mild winter, it will take the pressure off the customer."

Still, homeowners can take steps to minimize the winter's impact. Utility officials and the U.S. Department of Energy provide this advice:

Add insulation to attic, basement, walls and crawl spaces to make sure heat isn't escaping. Duct systems that could leak heated air into unheated spaces also should be insulated.

Caulk, seal and weatherstrip all seams or cracks that also could allow heat to leak out and cold air to seep in.

Install an energy-efficient furnace and make sure it's properly maintained.

Replace old single-pane windows with energy-efficient double-pane models that contain high-performance glass. If you can't afford new windows, seal them with weather stripping.

Turn your thermostat down to 68 degrees at night, or install a programmable thermostat that will do it automatically. Use an electric blanket to keep you warm in bed -- it's cheaper than paying to keep the whole house warm.

Keep window drapes open during the day to admit sunlight and close them at night to keep warm air inside.

Spread your heating costs out over 12 months by signing up for a budget payment plan. It costs nothing and can be done at any time.

Contact programs that can assist customers if you can't pay your bill. The federally funded Low-Income Home Energy Assistant Program is run by the state Department of Public Welfare. The Dollar Energy Fund also distributes money contributed by utilities, customers and community groups to households in need.

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-- Martin Thompson (mthom1927@aol.com), September 17, 2000