As one of the nation’s leaders in heating oil use, experts say Connecticut has plenty of supply on hand, but some energy companies are advising customers to conserve as prices surge.
Last week, Connecticut retail heating oil prices shot past $5 per gallon on average, according to data from the Energy Information Administration. Prices averaged $3.17 in early October 2021, when many customers were locking in contracts for the season, after a prolonged stretch of lower prices during the early phase of the COVID-19 pandemic before the downward trend ended last fall.
Last week, U.S. Sen. Richard Blumenthal, D-Conn., backed the idea of a “windfall profits” tax on large oil and gas companies that are benefiting from the surge in prices. Blumenthal said his plan would result in families receiving quarterly rebates that total $360 each year if oil prices average $120 a barrel.
Connecticut households burned about 350 million gallons of heating oil in 2020, EIA estimates, down 10 percent from the year before in part due to warmer weather. Including an equivalent amount firing furnaces at businesses and other facilities, Connecticut ranks fourth nationally for heating oil use, according to EIA, behind only New York, Massachusetts and Pennsylvania.
The Connecticut Department of Consumer Protection lists 585 heating oil dealers with active registrations on file with the state, including some based in New York, Massachusetts and Rhode Island. Those companies draw from about 30 oil terminals in Connecticut, as listed by the Connecticut Energy Marketers Association. CEMA member wholesalers include Global Companies, Gulf Oil, Inland Fuel Terminals, Motiva Enterprises and Sprague.
The head of CEMA expressed confidence that while oil prices could stay up for a lengthy stretch during the Russia crisis, he does not see a scenario where a squeeze on supplies would surface, given the capacity of Big Oil to pump additional amounts and store it.
“I hear every day from dozens of dealers about the various issues that they are dealing with — and supply isn’t one of them,” said Chris Herb, president of CEMA. “I can say with certainty that literally thousands of trucks go to terminals in New Haven, Bridgeport, Groton, Rocky Hill, Wethersfield, East Hartford — and have no problem whatsoever getting supplies of any fuel at all.”
Gary Sippin, president of Monroe-based Sippin Energy and a CEMA board member, agreed the U.S. supply of oil is not in jeopardy, but said commodities traders are creating havoc with prices as they react to the latest developments in the Russia crisis.
When homeowners lock in their prices in advance with local oil dealers, their wholesalers guarantee those prices by purchasing futures contracts on the Chicago Mercantile Exchange that are similar to insurance.
“With a futures market, they can ensure that those prices are protected well into the future when that supply is available,” Sippin said.
Oil customers on variable contracts get no such protection, however. In a letter last week to customers of Bridgeport-based Santa Energy, the company’s president, Peter Russell, advised them to consider lowering their thermostat ranges by a few degrees. Other tips include letting in as much sunlight as possible during the daytime hours, close shades and drapes at night, and move furnishings away from baseboard heating elements to maximize the energy released into the room.
“If prices continue to increase, we should deliver sooner than later. If prices were to decrease, we should be holding off on making a delivery as long as possible,” Russell stated in a joint letter co-signed by the company’s operations chief Stephen Santa. “Unfortunately, there is no way to predict what will happen in the future. Do we send a truck today, or do we wait? I wish I had the correct answer.”
Northeast home heating oil delivery companies are for the most part private enterprises, but Stamford-based Star Group makes its revenue and profitability information public through the Securities & Exchange Commission. Star Group owns multiple oil delivery companies in the Northeast, including Petro.
In the final three months of 2021, Star Group absorbed a 60 percent increase in the cost of heating oil it sells, averaging $2.07 a gallon during that time. The company averaged a retail price of $3.51 for each gallon delivered, for a gross profit of $1.44 that was more than 12 cents better than its profit margin the previous year.
A Star Group spokesperson declined comment in response to questions about supplies and prices considering the Ukraine conflict and oil embargo on Russia. But the company has referenced the prospect of a global disruption to supplies in its previous annual reports, including its most recent filed last spring.
“We believe that our policy of contracting for the majority of our anticipated supply needs with diverse and reliable sources will enable us to obtain sufficient product should unforeseen shortages develop in worldwide supplies,” Star Group stated in the recent annual report.
Residents with lower incomes can seek help paying home heating bills through Connecticut Energy Assistance Program and Operation Fuel or by calling the state’s 211 social services hotline.
“We haven’t seen a spike in requests yet, but we are on track to have served about 5,000 households between December and the end of our program year, which ends in May,” Brenda Watson, executive director of Operation Fuel, said in an email. “If we see an increase of requests in May, we will consider remaining open for assistance through the middle of June.”
Includes prior reporting by Luther Turmelle.
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