Heating up

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Kevin Dorgan, owner of Direct Fuel, delivers oil to a Patricia Road home in Peabody. Ken Yuszkus

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March 7, 2012

Heating up

Oil prices higher despite the mild weather

By Ethan Forman Staff writer The Salem News Wed Mar 07, 2012, 05:00 AM EST

PEABODY — Heating oil prices have been on the rise in the Bay State despite a mild winter.

A state survey pegged the average at $4.14 a gallon last week, up from $4.06 a gallon the week before.

Last year at this time, heating oil averaged $3.77 a gallon. That's an extra $37 on every 100 gallons of oil delivered to consumers' homes.

If you are looking for a culprit, local oil dealers say don't blame them. They just transport heating oil and are also being hurt by the high prices, which they are at a loss to explain.

"We are just kind of pawns in the game," said Tim O'Brien, office manager for Ashley Fuel of Beverly. "We don't like the prices high, just as our customers don't like the prices high."

Ashley Fuel's price last week was $3.88 a gallon, which was toward the low end of the state survey that found prices as low as $3.65 a gallon and as high as $4.80 a gallon.

Direct Fuel of Peabody was charging $3.55 per gallon this week, below the bottom on the state survey.

Owner Kevin Dorgan said his customers are thankful for the mild winter. Had the region seen a more typical winter, more customers would have felt the pinch of high oil prices.

One of Dorgan's savvy customers is Donna Greus of Peabody, who tracks oil prices on a website called NewEnglandOil.com. When she sees the price starting to go up, she calls Direct Fuel to arrange for a 100-gallon delivery, the minimum most companies will deliver.

"If I didn't watch it, it would be bad," said Greus, who is able to heat only the rooms she is in to save on oil. She is out of work right now, so her family has to make ends meet on her husband's salary as a heavy equipment operator in the construction industry.

Greus dug up her oil bills from last winter and found she was paying $3.09 a gallon last January and $3.25 last February.

"I would definitely be in trouble if it wasn't a mild winter," she said. "I would have to call twice a month; who can afford that?"

As it stands, many customers, including many of his elderly ones, are struggling with the high prices, Dorgan said.

In the long run, Dorgan blames regulations on drilling, which limit the creation of future supplies, and the rejection of a proposed oil pipeline from Canada to Texas as factors in high oil prices. He also blames speculators, "who are buying contracts and who never physically take possession of it."

Much of the increase lately, however, has to do with uncertainty over tensions with Iran, he and other dealers said.

The combination of a mild winter and high oil prices has hurt dealers, who sell less fuel as a result.

"We have 60-degree days in January, I'm not (selling more oil)," Dorgan said. "It's been a tough winter, needless to say."

It's been good for consumers, because they don't have to buy so much oil, but "very tough on the oil companies," he said.

Prices for crude oil have remained relatively high since the summer of 2008, when the price for a barrel hit $150, said Michael Ferrante, president of the Burlington-based Massachusetts Oilheat Council, a business association for oil dealers. The price has fluctuated and fell to about $85 a barrel last year. It's presently hovering around $110 a barrel.

Many small dealers are having a hard time with high oil prices. Many base their purchases on what their customers have used in the past, and many companies have committed to purchasing at that level even when their customers' consumption is down.

"Their business is off," Ferrante said.

Nancy Hart, the office manager for Nekoroski Oil Co. in Beverly, was at a loss to explain why oil prices are so high. Her company's price of $3.89 a gallon is also toward the low end of the state's survey.

"That's the $64,000 question," Hart said. "Our customers are pretty OK about it right now. We haven't hit the $4 mark."

One measure of how much an oil dealer's business is off is a measure of degree days, a scientific formula dealers use to determine when to make automatic deliveries. The number of degree days is off by 30 percent from last year, Ferrante said.

Low-income households that do not have a margin for error in their budgets are especially sensitive to high heating oil prices, said Beth Hogan, executive director of the North Shore Community Action Programs in Peabody.

The regional agency is one of 22 statewide that administer fuel assistance grants for low-income residents. Last year, the program served 4,000 households, and Hogan estimated the number would be about the same this winter.

"Although people may be receiving $600 to $1,000, it may not be going as far (because prices have risen)," Hogan said.

Hogan fears that if people cannot afford an oil delivery, they may try to heat their homes using stoves, space heaters or other methods that could have tragic consequences.

"You've got to keep your heat on," Hogan said. "Even though it's not below freezing, you still have to heat your house."

Staff writer Ethan Forman can be reached at 978-338-2673, by email at eforman@salemnews.com or on Twitter @DanverSalemNews.