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Temperatures head down, but so do heating oil prices

By Ward Morehouse IIIStaff correspondent of The Christian Science Monitor / January 14, 1982



New York

At a time when many Americans are hearing their furnace roar into action for long stretches during the cold snap, here's a warm thought: Oil heat consumers still have a chance to save a bit on their heating oil bill this winter.

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If this seems like a contradiction in practical economics, consider this: The world ''oil glut,'' coupled with a comparatively mild winter until recently, has helped depress demand for heating oil, spurring several major oil companies to reduce oil prices in the past month.

The US Department of Energy, the National Oil Jobbers Council (NOJC), which represents 8,000 oil suppliers, and a wide range of oil analysts say heating oil prices won't be taking off for new highs this heating season, even if the current cold spell sticks around for some time.

''We will see no more than a two to three cent increase in the price of home heating oil this winter, and I think three is really on the high side,'' says Warren Shimmerlik, an oil analyst with Merrril Lynch, Pierce, Fenner & Smith Inc.

Mr. Shimmerlik's price forecast agrees roughly with the most recent home heating oil price projections of the US Energy Department's Energy Information Administration (EIA). If these forecasts are borne out, the heating oil price rise this winter would be significantly below last winter's.

Nationwide, the average price of a gallon of heating oil rose nearly 15 cents between January and March in 1981, largely due to the decontrol of domestic crude oil along with a general OPEC crude oil price increase in January.

However, as Dr. Wiliam Skinner of the EIA points out, ''the (average) price of $1.255 a gallon was the peak'' in heating oil prices, and they subsequently started to come down gradually because of the abundance of crude and falling demand.

The Sun Oil Company, the nation's 11th largest, has lowered its wholesale price of heating oil by three cents in the last six weeks, said a Sun spokesman.

Less consumer demand was the primary factor in the price reductions -- and indications at the retail level shows that at least some of these reductions are being passed right on to customers.

''It appears there has been a downward push on prices,'' agrees David Morehead of the NOJC.

Meanwhile, most reliable indicators point to abundant supplies.

At present, Dr. Skinner says the average price of home heating oil is around are higher in the Northeast and Midwest than in the South and Southwest because demand is greater and supplies can be exhausted more quickly in the cold regions.

''From the consumers' point of view, they are in good shape,'' although lower prices are too good for his company, says Gerald Bradley, a spokesman for the Gulf Oil Corporation in Houston. Mr. Bradley notes that Gulf lowered the wholesale price of heating oil by four cents a gallon in parts of New England and New York on Jan. 9. In Philadelphia, Gulf lowered prices 2 to 2.5 cents a gallon the same day.

''The overall supply situation is very good,'' notes NOJC's Morehead. ''The overall national situation is that supplies should be adequate,'' even if there is protracted cold weather, Dr. Skinner says. And if heating oil stocks should be drawn down beyond current expectations of experts, spokesmen for the American Petroleum Institute and individual oil companies say refineries would have no trouble at all producing what is needed. A ''glut'' of crude oil remains and most refineries are operating far below full capacity.

Morehead and others say there is a possibility that ''spot shortages'' could develop in some parts of the country if bad weather hampers fuel deliveries, as has happened in past winters.