Big spread prevails in heating oil prices

Big spread prevails in heating oil prices


When it comes to heating oil, who you buy from will determine the price you pay. But sometimes a cheaper price comes with a cost, especially if your furnace quits when it’s 10 degrees outside on a blustery gray day in January.

Who are you going to call?

So-called cash and carry dealers can sell their heating oil cheaper than a full-service dealer because their overhead is lower. In many cases, they are not paying commercial rent, salaries to service staff, or worker’s compensation costs. They may or may not offer the services of a subcontractor for furnace repairs.

Local full-service fuel oil dealers in Rhode Island pull their fuel from the same five terminals in Providence and East Providence as their cash and carry competitors, but their overhead costs are higher because of rent and staff, and so is the price they charge.

Exeter Fuel in Exeter is a full-service dealer, and owner Rosemarie Besson said her company gives priority on service calls to its regular customers during the winter heating season. During the summer, the company will provide oil burner service to anyone.

“It’s a Wal-Mart world today,” she said in reference to choices of cash and carry, versus full-service companies. “You have to do what is best for your family.”

J.C. Tefft Fuel Inc., in Hope Valley, is a cash and carry dealer. Judy Tefft says the price changes daily and her company has to adjust its prices to maintain the profit margin it needs. Even though it is cash and carry, her company does offer automatic deliveries and “will calls,” for those who call when they see the fuel gauge dropping.

Tefft, in business since 1977, also offers oil burner service to its customers, but it is through an outside contractor. Her company does not get involved.

None of the dealers interviewed for this story have any guesses about where the price is going. They all say it is out of their hands.

But Jamie Lohr, president of Guardian Fuel & Energy Systems in Westerly, said the price of heating oil is expected to be 10 percent lower this year than last.

“We are already seeing evidence of that,” she said recently.

The average price of a gallon of heating oil in October 2012 peaked at an average of $3.92 a gallon, according to the Rhode Island Office of Energy Resources. It hit $4.05 a gallon in February 2013. In comparison, the average price of heating oil in October of this year peaked at $3.75 a gallon, and by Nov. 18 showed a slight rise to $3.79.

Lohr added that her company is also working with various family-owned heating oil dealer groups and they are seeing the quality of heating oil improve.

Since 2006, Guardian has blended its oil with biodiesel to create Bioheat. The blend results in a cleaner burn by reducing sulfur emissions. Burning cleaner means it burns more efficiently and can reduce a homeowner’s service costs and fuel consumption.

Bioheat is essentially a petroleum-based heating oil blended with a percentage of biodiesel, which costs the same as heating oil. Biodiesel is made from vegetable oil and Bioheat will work in home heating oil equipment, commercial boilers, and diesel generators, without any modifications.

In fact, Guardian likes the blend so much it runs its trucks on the fuel.

Guardian buys its biodiesel from Newport Bio-Diesel and blends it with petroleum at its facility.

Like other companies, Guardian offers no-interest budget plans that average fuel use for a year and spread it over 12 months. They also offer other plans that can lock in the price, but those plans come with a fee of 30 cents per gallon. If the price drops, you are still paying the set price.

So what drives up the price of home heating oil? Lohr puts that on the shoulders of commodities traders who buy and sell contracts, but never take delivery on a drop of oil.

In fact, the country is now producing more oil than it needs and is exporting it, she said.

Jim Lathrop at Best Energy in Pawcatuck reiterated that no one can predict the price of fuel oil but there don’t seem to be any factors this winter to swing the price of fuel, “so hopefully we will see prices moderate.”

He, too, said the price does not seem to be controlled by the old market engines of supply and demand but rather by political issues and by the commodities traders.

Lathrop said his company will service customers who do not buy his oil, but that his customers get a better rate for that service.

For today’s consumers, he noted, the Internet plays a big role.

“Information is more readily available today,” he said. “It puts more power in the hands of the consumer. They can shop for features and price information.”

But he prides himself on his full-service shop and its personal service. “We’re a small family business,” he said. “It’s like calling your neighbor or it could be someone who lives nearby. You are less likely to be a number.”

“The margins are not large enough for us to have a big staff,” he added. “We pride ourselves on the quality of our service.”

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