The Farmers’ Almanac is predicting New Englanders will experience a “wet and wild” winter as part of recent warming trends, but that likely won’t translate to many ups and downs in home heating costs.
The U.S. Energy Information Administration is forecasting stable oil prices through the first quarter of 2020, two signs that indicate — depending on which authority to invest faith — bill payers can look forward to steady if not lower prices for home heating fuel this season.
“Right now it’s much ado about nothing in that (energy) markets are relatively balanced. I expect pricing to stay about the same through the end of the year, maybe even see downward pressure,” said Rob Stenger, co-owner of home heating oil and propane supplier Simple Energy in West Lebanon. “The fundamental market is in the best shape in a long time.”
Of course, as Stenger knows well from his 40 years in selling home heating fuels, “geopolitical landscape and major weather events” can upend predictions about the future in the bat of an eyelash.
“That’s the wild card,” he cautions.
The unforeseen aside, however, unlike last year when households were looking at a 20% to 25% jump in their coming winter heating bills, recent stable production in crude oil and steady supply in refinery products suggests a mild season for home fuel prices.
Crude oil prices this year have been trading between $10 and $15 per barrel below their level in 2018, bringing down with it the cost of derivative products such as heating oil, propane and gasoline.
Nonetheless, home heating fuel prices can vary for residents between the Twin States, where they historically run a little higher in New Hampshire than Vermont.
For example, in Vermont, the August price — the most recent available — for No. 2 fuel oil was $2.65 per gallon, down nearly 8% from $2.87 per gallon the same month last year. Meanwhile, propane is down 12.8% from $2.58 per gallon to $2.25 per gallon, according to the Vermont Department of Public Service. In New Hampshire, the price of No. 2 fuel oil in August was $2.83 per gallon compared with $3 per gallon 12 months earlier. Propane has dropped to $2.71 per gallon from $3 a year earlier.
The two major grades of oil for refining, West Texas Intermediate and Brent Crude — the former comes from U.S. oil fields and the latter is drilled from offshore fields in the North Sea — are currently trading at around $56 per barrel and $60 per barrel respectively compared with $76 per barrel and $86 per barrel at their 2018 peaks last October.
“Because the price of crude oil is down, we’re seeing all the products refined from crude down, too,” said Matt Cota, executive director of the Vermont Fuel Dealers Association. “A 7% to 12% drop in energy prices puts people in a good space.”
About 50% of the buildings in Vermont use heating oil and about 20% use propane, Cota said. Natural gas, which also has about 20% of the market, is largely confined to users in Chittenden, Franklin and Addison counties by virtue of concentration of population and the TransCanada Pipeline.
Given that the average Vermont household consumes about 700 gallons of heating oil or 950 gallons of propane annually, according to Cota — it requires 1.4 gallons of propane to produce the same BTUs as 1 gallon of heating oil — the typical home in the state could expect to pay $1,885 a year for oil and $2,138 a year for propane based on current market prices.
Between 40% and 50% of customers enroll in pre-buy fuel purchasing programs that lock in or cap fuel costs at a significantly discounted rate to the market price, according to Cota.
Still, two neighbors enrolled in a pre-buy or cap purchasing program with the same supplier can pay different rates because the price they pay depends on a variety of factors such as that household’s fuel consumption and whether they own or lease their storage tanks.
As a result, unlike gas prices that are displayed at every gas station, heating fuel distributors — from local suppliers such as Simple Energy to regional operators such as Rymes, Dead River, Cota & Cota, Irving, Eastern and AmeriGas do not publicly disclose their discounted rates and require customers to contact the supplier to obtain a quote.
However, Hilltop Energy Buyer’s Group, a Vermont fuel buying club that members join to purchase heating fuel in bulk at a discount, is offering a fixed-price plan for propane ranging from $1.99 per gallon to $2.60 per gallon — the greater the number of gallons, the lower the fixed cost — supplied through AmeriGas.
The factors impacting the cost of heating fuel occur far from the Upper Valley, pointed out Casey Cota, president of Cota & Cota, a Bellows Falls, Vt.-based heating fuel distributor that serves the Connecticut River Valley from Brattleboro, Vt., to Lyme and Thetford.
Those factors have unpredictable and opposing consequences.
“China is the second-highest user of propane in the world behind the U.S.,” he said. “If the trade tariff situation doesn’t get rectified and goes into the winter, whatever fuel we are exporting to China will mean we have more supply on hand to sell domestically, which in turn may mean the pricing going down. That’s the good news.”
The “bad news,” Casey Cota said, is that the spring rains that delayed the growing season are leading to late harvests and, to dry crops quickly, farmers have to resort to propane-fueled drying barns.
“The later drying season increases the demand for propane from farming and agriculture which reduces the supply (of propane) going into winter” to heat homes, Cota, who is a cousin of Matt Cota, explained.
“We’re fortunate to have seen both propane and fuel oil prices remain low during the summer, but I can’t guess what will happen in the future,” he said.
John Lippman can be reached at jlippman@vnews.com.