Home heating oil prices cooling off
October 12th, 2008 - Posted in Energy PricesHomeowners wringing their hands over high home heating oil prices received a sedative of sorts yesterday after crude oil prices slid below $90 a barrel. Oil had risen as high as $147 a barrel in July.
Lower crude means lower heating fuel prices, which have been declining and are expected to continue to do so. On Long Island prices dropped to an average $4.04 a gallon as of Sept. 29, from a peak of $4.93 on July 14, according to the New York State Energy Research and Development Authority.
The agency’s latest price survey, which is expected to be released this week, should show home heating oil prices below $4 a gallon based on declining crude oil prices, said Kevin Rooney, chief executive of the Oil Heat Institute in Hauppauge.
“I am guardedly optimistic that the price will continue to decline at the crude level,” he said
He attributed the drop in the price of crude, which settled at $87.81 a barrel for November delivery on the New York Mercantile Exchange yesterday, to a rise in the value of the dollar, which makes oil imports cheaper, and also to the cooling of speculation in the commodities market, where traders who were shunning the volatile stock markets were bidding up prices. Now they are retreating from commodities into the more stable U.S. Treasuries.
“The level of speculation in the oil market has dropped off dramatically in the last 60 days,” Rooney said.
Rooney believes those factors, coupled with a year-to-year 12-percent drop in oil consumption worldwide - or “demand destruction” - have driven prices down.
“Now you’ve got an abundance of supply over demand that is truly the icing on the cake and helping to bring prices down,” he said.
But prices are still significantly higher than a year ago, said Tom Lynch of the state energy agency. A year ago, home heating oil was $2.93 a gallon, he said.
“We’re looking at prices still significantly higher year over year,” he said.
Some customers rushed to lock in contract prices after analysts this summer warned of $5 a gallon for home heating oil this season, said Joe Roy, Long Island coordinator for the New York Public Interest Research Group’s Fuel Buyers Group. And some local oil companies locked in prices on future purchases.
That doesn’t look like such a great decision now.
“It was a total guessing game,” he said.
