Consumers who depend on heating oil face a bleak outlook as winter approaches. The primary worry centers on cost—fuel oil prices remain prohibitively expensive with little prospect of decline in the near future. Although November offered mild conditions, December has delivered consistently frigid weather punctuated by only a handful of warmer days. The impact of these cold periods has been compounded by heating oil costs that have climbed dramatically. Prices currently sit around $3 per gallon, representing an increase from earlier in December, with the statewide average reaching $3.22 this week. According to industry experts, consumers should prepare for sustained high prices throughout the season.
Phil Giudice, state commissioner of the Department of Energy Resources (DOER), characterized the situation starkly: “It’s up significantly from last year. It was in the high $2 range at this time last year and this year we’re in the low $3 range. People should re-up their interest in conservation and energy efficiency and make sure their furnaces are as efficient as possible…[Prices] are not as bad as the record highs we had in July and August two years ago, but the long-term picture is not pretty. [People] shouldn’t expect heating oil prices to go down this season.” Michael Ferrante (not the Revere School Committeeman), president of the Mass Heating Oil Council, expressed his frustration: “The prices are high now and that’s frustrating to many of us because these heating oil prices are tied to crude oil prices and that’s truly out of everyone’s control. That’s frustrating, and frustrating is the right word for it. There’s really no reason why crude oil should be so high. The fundamentals of the market tell us something completely different. There’s plenty of oil. Demand is normal, and there are plenty of inventories of heating oil. This is something we’ve been dealing with now for the last two years.”
The prospect of paying $3 per gallon throughout a full heating season has left many anxious. A 200-gallon tank filled at current rates exceeds $600—an expense that strains household budgets. Fuel oil companies acknowledge the difficulty, recognizing that many customers face genuine hardship. Jon Hartman of Northeast Oil noted: “Most of the people who got [federal] fuel assistance in November are pretty much finished with it. Most people on fuel assistance got between $350 to $360 for this winter. That’s not even a full tank. Everyone’s saying the economy is turning around. Where? What are you going to tell someone who is cold? No? I don’t have the heart to tell someone I can’t bring them oil because they only have $50 and the minimum is 100 gallons per delivery. People are telling me they’re out of work, they lost their jobs, they’re running out of oil and only have a little bit of money. People who have been buying oil from me for a long time are asking for accommodations. Even people who fill up every seven days are bundling up around the house, wearing sweaters, keeping it colder and shutting off rooms. No one can do this anymore.”
Disagreement exists regarding root causes of the price surge. Roger Litman, long-time president of North Shore Fuel in Revere, attributes the explosion entirely to speculation in oil commodity markets and faults the government for permitting such activity. “It’s a situation that has little to do with the traditional supply and demand model,” he explained. “To a large extent, it’s dependent on speculation, which they have tried but have not necessarily succeeded in straightening out. I wish I had a good answer for it all. The speculation has been caused by the major banks stepping in and taking positions. There’s plenty of oil available. The problem is it’s still in a speculative position.” Litman argued that inadequate government oversight bears responsibility: “The federal government has, frankly, not done a good job for the last 10 years in monitoring the situation. The obscene levels of compensation for speculators are unbelievable.”
Commissioner Giudice offered an alternative analysis. He pointed out that heating oil inventories are actually 8 percent above the five-year average, indicating adequate supply. Yet he identified the core issue as fundamentally rooted in market forces: “It’s all dependent on supply and demand. Demand had been slow through November because it was warm. That has changed this December…There’s definitely an influence of speculators and financiers in the market, but they are really responding to the underlying trend—that being the price of the commodity (crude oil). I can actually see speculators pushing down the price of heating oil.” Giudice also suggested a structural constraint: “The new supplies of oil are not as prevalent as they were as recently as five to 20 years ago.”
Ferrante strongly rejected the scarcity argument, maintaining that abundant crude oil exists globally: “I would refute that [we’re running out of oil]. Anyone who says we’re running out of oil isn’t watching what’s happening in the world…In our lifetime, I don’t think there’s going to be any shortage of petroleum…So, what’s the reason crude oil is so high? Many of us believe speculators are driving it higher by investing in crude to make money.”
High prices have fundamentally altered how oil companies operate. Litman revealed that his firm discontinued fixed-price contracts this year, a practice historically common in the industry. Two years prior, when panic gripped markets, numerous customers locked in steep prices then abandoned agreements after prices collapsed. The financial consequences proved devastating: “We lost more money on that than I care to think about. We lost what it will take me between four and 10 years to make up. I don’t do any more contracts. I don’t dare. Once burned, twice shy.”
Ultimately, the central concern remains unchanged across the industry. “I’d love to see the price go down,” said Litman. “Do I know if it will? I have no idea.”