The oilman cometh, his ears ringing

By

Tom Burke screws the cap back on the fill pipe and drags the hose back to the oil truck.

At most stops along his route, the heating-oil deliveryman comes and goes in silence, but this customer comes out to survey the scene.

"You think I can afford lunch, or will the bill be too high?" the elderly man jokes.

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Mr. Burke assures the man that he will be OK, to go ahead and treat his wife to lunch. After a bit more banter, he hands over the bill and heads back to the truck, grinning.

You need a little humor these days if you're in the heating-oil business. The fact is, customers aren't always so friendly - especially when word is out that prices could reach last year's record of more than $2 a gallon.

The stories of deliverymen

like Burke offer an inside look at the quirky economics of bounding energy prices. Yes, customers are angry, but so are wholesalers, upset over low supply. Caught in the middle are heating-oil dealers, who aren't doing so great themselves, with some forced to cut full-time workers and trim back on the number of trucks after last year's costly season.

Now, as some experts forecast a similar winter, homeowners and dealers are bracing themselves - especially in the Northeast, where the law of supply and demand hits the hardest.

In his tan work boots and blue uniform - with "Tom" embroidered on his shirt - Burke fuels dozens of homes each day - at $1.55.9 per gallon currently. He's got the countenance for it: easy-going and unflappable.

At another house, a gentleman in a silk bathrobe pokes his head out the back door while Burke unscrews the rusty cap on his fill pipe. The man explains how he was told to wait for the end of the summer to fill his tank, when prices would most likely be at their lowest. But prices hit their lowest in mid-July this year and have been rising ever since. He is stuck paying close to $220 for 138 gallons of heating oil.

Burke, who works for Boston-area oil dealer James Devaney, simply nods his head in agreement and says something about how crazy things have been lately.

"I just try to explain that I don't set the price," he says as he walks back to the brightly painted truck.

There are a lot of factors that contribute to the high price, including low production by OPEC, the high cost of crude on the futures market, and a booming economy. As a result, price protections, such as price caps and fixed-price contracts, have become scarce. And all of this is bound by free-market economics.

"Government is loath to manipulate the price because they prefer to let the market run its course," says Michael Ferrante, president of the Massachusetts Oil Heat Council, which represents dealers in the state.

Last weekend, though, President Clinton announced a stockpiling of 30 million barrels of oil and more federal assistance for low-income families. Earlier, Energy Secretary Bill Richardson announced the stockpiling of 2 million gallons of home heating oil for the Northeast.

While the rest of the country will feel the pinch this winter, no region is more dependent on heating oil than the Northeast. Massachusetts is third in heating-oil consumption behind New York and Pennsylvania. It is also the one area of the country without a refinery, making supply harder to come by and price more volatile.

The closest refinery to New England is in Canada and the closest pipeline ends in New Jersey.

"This is not an Internet industry of instant download and ... delivery. This is an industry of slow boats and trucks and pipes, all subject to different forces," says Brian O'Connor of the Citizens Energy Corp. in Boston.

Refineries across the United States are running at 96 percent capacity, producing about 1 million gallons of fuel a week. Inventory stands at almost 120 million gallons, which worries some in the industry. They note that last year's supply at this time - 144 million gallons - was still too low when winter hit.

Supply was a major part of New England's problem, says Mr. O'Connor. Last year, during the first real cold spell, the area had only 4.5 million gallons of heating oil on hand. Today, it has more than 6 million gallons. But New England has limited storage capacity.

Still, it is normal to have oil stocks somewhat low at this early point of the season. Fully 90 percent of heating oil is refined during the winter, says John Flemy, director of policy analysis and statistics at the American Petroleum Institute in Washington.

"Refineries are running flat out, but demand is strong and supplies are tight," he says. After years of low prices, "this is a wake-up call."

No one knows that better than Burke. In his 17 years of delivering heating oil, he has never seen prices this high. Back in 1988, he remembers, a gallon cost $1.62, but two years later, it had fallen to 60 cents, he says.

"The price will bounce back. It always does."

Until then, people will just have to make do. Sitting high above the rest of traffic in the cab of his 5,000-gallon oil truck - the CB radio swinging from the rear-view mirror - Burke says people can't go without heat.

"I had a guy yesterday come out and ask me what the price of oil was. I told him: $1.55.9. Well he just lost it, started telling me something about how it was only $1.36 in Connecticut. I thought he was going to tell me to put the hose away, but I guess he realized he needed it," Burke says. "So I filled his tank."

(c) Copyright 2000. The Christian Science Publishing Society

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