September 30, 2004
BY RANDI F. MARSHALL
Newsday, Staff Writer
It may be a choice between heavier sweaters or lighter wallets this winter.
The home heating season is just starting, and fuel oil prices are already more than 20 percent higher than they were last year at this time in the metropolitan area.
With the price of crude oil hovering around $50 this week -- and some experts saying it could go as high as $60 -- this does not bode well for fuel buyers as temperatures fall.
"Every consumer, regardless of how they heat their homes, is going to be paying more this winter than they did last winter," said Kevin Rooney, chief executive of the Oil Heat Institute of Long Island. "Whether they end up paying 10 percent more or 20 percent more remains to be seen."
Home heating oil reached $1.912 a gallon on Long Island last week, compared with $1.586 at this time last year. In New York City, home heating oil hit nearly $1.94 a gallon last week, 22 percent higher than the $1.583 per gallon it cost in 2003. If those prices hold up, the average homeowner could wind up paying an extra $350 per year for fuel oil.
Those statistics worry consumers and suppliers alike, all of whom are hoping the prices come down before the first cold wind blows. Rooney noted that energy prices follow one another, so as home heating oil rises, so to will natural gas.
At this time last year, the average cost of gas for utilities was $6.02 per dekatherm, a standard unit of gas sales. This year, it's $7.11, up 18 percent, but consumers probably won't see the full increase in their bills because gas makes up only part of the cost of service, KeySpan spokesman Ed Yutkowitz said.
"I love the winter, but I'm not looking forward to the price of fuel climbing and climbing every day," said West Islip resident Jeanette Kreditor, whose four bedroom cape is heated by oil. "It gets costly."
Kreditor, who has lived in West Islip for 44 years, said she paid as much as $2.15 a gallon in last year's heating season.
"It's exorbitant, it's crazy, it's outrageous," she said.
And it comes on top of already high gasoline prices, which Kreditor said takes a big bite out of her spending money, since she constantly shuttles her daughter, Danielle, 9, from gymnastics to dancing to chorus.
"You have to really cut back," she said. "I don't go out as much as I used to, and I don't get my nails done anymore."
Economists say every dollar increase in a barrel of crude oil is a $5 billion hit on American consumers. But it may not really affect consumer spending until the first order of heating oil is delivered.
"The true shock of the prices they're facing hasn't hit them yet," said Joel L. Naroff, Commerce Bank's chief economist. "I think the worst times are ahead of us... . For people who are on tight budgets, this is a real killer when it comes to discretionary spending."
While supply seems stable, a confluence of events is responsible for the price spikes. Hurricanes along the Gulf Coast, unrest in Nigeria, and lower production in Iraq and Venezuela are certainly factors, but industry experts also blame traders looking for a fast buck and the "fear factor" -- the uncertainty over terrorism, the war in Iraq and other potential supply disruptions.
"The market is no longer driven by supply-demand economics," said John Maniscalco, the executive vice president of the New York Oil Heating Association in Manhattan. "It truly is unfortunate that for the consuming public, it's going to cost them more to heat their homes this winter because of Wall Street speculators."
Market analyst Phil Flynn, with Alaron Trading in Chicago, said reality, more than fear or speculation, was driving the market. He attributed much of the oil price hike to economic growth here and abroad.
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