Sunday, October 15, 2000

Mainers take looming heating-oil price hike in stride

By TUX TURKEL, Portland Press Herald Writer

Copyright ) 2000 Blethen Maine Newspapers Inc.

There's a banner strung outside the Home Depot store in Portland that reads: "We sell oil tanks."

Piles of black metal  275-gallon tubs of energy security  rise from the ground. For $179 a tank, resourceful Mainers can set up their own strategic heating oil reserve in their basements.

Next to the tank pile, two dozen hydraulic wood splitters are arrayed like cannons. They could provide a strong line of defense in a state with enough forestland to be the OPEC of firewood.

Inside the store, Art Davis of Falmouth was struggling last week to load a giant package of fiberglass insulation onto a cart. He bought a 60-year-old Cape last year and was surprised to find only a windbreaker-thick layer of attic insulation, instead of a fluffy overcoat.

"Maybe when you're spending 69 cents a gallon for heating oil, it's not an issue," Davis said, thinking about oil's rock bottom price of two years ago.

The scene at Home Depot last week had a familiar look and feel, reminiscent of desperate heating seasons of the past when temperatures and energy prices headed in completely opposite directions.

But is Maine again facing an "energy crisis" on a par with the fuel crunches of the 1970s and 1980s? Are residents really changing their behaviors and lifestyles in anticipation of a sustained period of high oil prices?

The answer seems to be no, or at least, not yet. Despite some angst about the price of oil, 2000 isn't shaping up as another 1973.

Twenty-seven years after Middle East nations turned off the petroleum spigot to the United States, six out of 10 Maine homes are heated with oil. And state figures show the total amount of oil burned in Maine homes during 1997 was about the same as in 1975, although consumption per home has dropped over time because newer homes are better insulated.

There's good reason for Maine's continued reliance on oil: Despite periodic price spikes, heating oil in New England has in most years been less costly than natural gas, its leading competitor, according to the U.S. Department of Energy. And oil is more convenient to burn than Maine's homegrown favorite, firewood.

New natural gas pipelines through Maine are attracting more customers who like the idea of a cleaner fuel that's less vulnerable to supply problems. But natural gas prices are rising, too, so it's likely heating oil will remain Maine's fuel of choice for the time being.

Of course, oil is destined to be less popular this winter.

Last week's turmoil in the Middle East sent immediate shock waves through worldwide petroleum markets. Crude oil rose to a 10-year high, at more than $35 a barrel. The impact trickled down to Maine in the form of higher gasoline and heating oil prices, up a nickel to 10 cents a gallon in some instances.

The question now is whether political unrest and other factors will keep oil prices high enough to once again alter the way Mainers think about energy. Duration is the key, because aside from the sustained period of high oil prices in the early 1980s, the worst price spikes have typically been short-lived. People complain, but ride them out.

Gordon Weil, an electricity supply broker in Augusta, said he recently calculated that gasoline selling for $1.50 a gallon today is equal to gasoline at 40 cents in 1973, after inflation is factored in. The comparison with heating oil is similar.

"The real price of the fuel hasn't gone up," said Weil, who directed Maine's now-defunct Office of Energy Resources from 1980 to 1982. "And with the economy as good as it is, it makes people feel they can afford it."

That doesn't mean all Mainers are taking oil prices in stride.

At Home Depot, on a gusty Columbus Day with snow in the air, there was plenty of activity in the insulation and weatherstripping aisles. Bob Ahearn, assistant manager for building materials, was swamped with homeowners who wanted to upgrade their attic insulation. Window shrink-wrap kits were going out the door in large quantities, and it was easy for Ahearn to spot customers with energy-saving questions on their minds.

"It's one of those days," he said. "You know what people are looking for."

Kathy Graffam had the look. She stood in the weatherstripping department, facing a wall draped with a confusing assortment of coiled foam and vinyl.

She was thinking about the front windows in her 30-year-old, oil-heated home in Gorham and how cold she is when standing in front of them. And she was worrying about the price of oil.

"I can feel the draft on the palm of my hand," she said, gesturing to imaginary glazing. "It's a wicked cold draft."

After consulting with a salesman, Graffam bought a roll of rope caulk to stuff into the places where she feels winter blowing in and money flowing out.

Graffam's reaction will be common across Maine this year, experts say. People can be expected to replace and upgrade weatherstripping, for instance, because these are small investments that pay for themselves quickly through fuel savings.

But it's unclear how many people are prepared to take the big steps that were common in the 1970s and 1980s, such as switching fuel systems.

At a conference last week to publicize the state government's renewed campaign for energy conservation, Gov. Angus King remarked to a hall filled with business people and housing officials that if the meeting were being held during the 1980s, everyone would be talking about firewood and their wood stoves.

"How many of you have split wood in the past few years?" King asked the group.

Some hands went up. But for the most part, these hands had been flipping on thermostats, not putting up cordwood.

King used the conference to introduce the state's new energy conservation campaign called BundleMeUp. It features a Web site loaded with information, tips and links to helpful resources for saving money on fuel bills.

The Web address is: www.bundlemeup.org

King said he doesn't expect an oil supply crisis, but he wanted Mainers to be prepared.

That seemed like good advice to John Flumerfelt, a consultant who worked at the state's energy office until it was closed in 1989. Flumerfelt drew fire from oil dealers at the time for alarming people, on the eve of the Persian Gulf war, when he suggested Mainers install two oil tanks as a hedge against higher-priced fuel. Today, that advice seems to have caught on at Home Depot.

"People were angry and surprised in 1989," Flumerfelt said, recalling how oil prices shot up suddenly.

By contrast, he said, Mainers are expecting high energy prices this year. They've gotten the message through months of news coverage and political warnings.

And compared to past periods of high oil prices, many heating customers are better prepared. Last year, for instance, one in four customers signed up for fixed-price contracts that are designed as an insurance policy against high winter spikes. This year, according to the Maine Oil Dealers Association, 55 to 60 percent of customers have done so.

"People are better educated about how energy markets work," Flumerfelt said.

Those markets seemed to be settling down late last week, but should stay volatile as tensions in the Middle East remain high.

Analysts noted a disturbing parallel to 1973, when Arab states imposed an embargo on oil exports to the United States in retaliation for supporting Israel in the Arab-Israeli war. Today, the relationships between nations are more complex in the global economy. But the threat of a supply disruption from the Middle East may be enough to keep prices high on commodity markets.

Either way, the insulation Art Davis is spreading across his attic looks like a good investment.

Staff Writer Tux Turkel can be contacted at 791-6462 or at:

http://www.portland.com/news/state/001015energy.shtml

-- Martin Thompson (mthom1927@aol.com), October 15, 2000