Caulking around doorways and window frames is one of several steps residents can take to weatherize their homes.

We at the Zone have encouraged our readers to take steps toward energy conservation wherever possible.  Simple, inexpensive investments in measures such as weatherstripping and lowering thermostat temperature can save homeowners hundreds of dollars a year on heating costs.

This summer, with crude oil at the record-high price of $147 a barrel, many heating oil users anticipated astronomical heating costs this winter and began weatherizing their homes to offset higher heating bills.  With oil prices currently almost 50 per cent lower than they were in July, waning interest in weatherization and other conservation measures would not be surprising.  According to a Reuters article published yesterday, interest is as strong as ever.  Americans are still working hard to seal up cracks in their homes and increase heating efficiency any way they can.  Home Depot and Lowe’s report big increases in demand for weatherstripping, programable thermostats, and other energy efficiency products in recent months, and these trends have remained strong even as the price of crude oil (and the related price of heating oil) has plunged.

According the the Department of Energy, homeowners who undertake weatherization projects for their homes save an average of $413 in the first year alone.  Those kind of savings are hard to pass up in the current economic climate, no matter what the price of oil may be.  Francis Rodriguez, head of the weatherization assistance program at the Association for Energy Affordability in the Bronx, credited New Yorkers with understanding that they cannot rely on low oil prices to save money on home energy costs: “They know the price is going down, but they know what would have happened if the price had stayed up that way.” (source: Reuters)

Put simply, energy conservation is always a good idea that will save residents money, regardless of the price of oil, natural, gas, or any other fuel.  It’s not too late to weatherize in preparation for this winter, so if you haven’t already, pick up some caulk and weatherstripping and get to work!

On October 8th of this year, the Energy Information Administration (EIA) released its short-term energy outlook, warning of substantially higher heating and energy costs this winter. That same day, HEAT This Week applauded the EIA’s cautious estimates, but questioned their accuracy. In the October 8th newsletter, (“What to Expect this Winter,” read the entire article on The Heat Zone blog) HEAT USA president Andrew Heaney explained that the EIA’s report ignored important economic evidence that crude oil and other energy prices would continue to decline sharply for several months, at least.

It looks like the EIA has come around to HEAT USA’s point of view. On November 12th, the agency released its November Short Term Energy Outlook, which essentially reversed the position set out in the October report. The EIA summarized its new position in the report’s top bullet point:

The current U.S. and global economic downturn has led to a decrease in global energy demand and a rapid and substantial reduction in crude oil and other energy prices. As a result, projections for both energy demand and prices are considerably lower than last month’s Outlook.

The new report offers good news for consumers of all petroleum products: heating oil, gasoline, propane, and natural gas users will all pay less for their fuels this winter than they did in 2007. As for heating oil, an Associated Press article specified that heating oil users are expected to pay $1,694 for oil this season, a 13 per cent decline from last winter, and almost $700 less than the EIA’s October prediction. The report forecasts the average heating oil price per gallon this winter will be $2.75, a 56-cent reduction from last month’s report and 17 per cent lower than last winter’s average price. In addition to plummeting worldwide energy demand, consistent increases in crude and heating oil inventories in the US have also contributed to lower retail prices, according to a Reuters article that noted heating oil inventories had risen by 1.3 million barrels in the last week.

The news appears to be consistent throughout the Northeastern states. According to the Scranton Times-Tribune, heating oil prices in Pennsylvania have fallen 15 per cent in the last month. The Boston Herald reported the average price in Massachusetts to be $2.85, 31 cents lower than November of 2007.

Of course, because the EIA’s reports come out every month, December could bring yet another drastic change in the short-term energy outlook, but that is unlikely. Because low oil prices are primarily a product of dwindling energy demand around the world, major price increases would have to be brought about by a resurgence in energy demand. While energy demand will almost certainly return to the early 2008 levels that caused record-high oil prices, it will not happen in a matter of days or weeks, but months or years. Heating oil prices will continue to fluctuate, but consumers throughout the Northeast can look forward to lower prices than last winter for at least the next two or three months.

NOTE: This article first appeared in the November 14th, 2008 edition of the HEAT This Week email newsletter.

A HEAT USA member recently contacted us with a great question: “I have always wondered why the price of heating [oil] is more than regular gasoline, when there are no taxes on it.” Actually, it is more of a statement, but still an interesting subject to wonder about.

It is logical to think that, since they are both refined from crude oil, that heating and gasoline should have similar prices per gallon. Add the state and federal taxes on gasoline, and you can expect gasoline to consistently cost more than heating oil, which is not taxed. Although this is sometimes the case, it is certainly not always the case. A quick look at the Energy Information Administration’s short-term energy outlook shows that on average, gasoline prices were in fact slightly higher than heating oil prices in 2006 and 2007. However, 2008 price averages and 2009 projected averages both show heating oil as slightly more expensive than gasoline.

So what accounts for these shifting price differences? First, we should note that gasoline and heating oil prices vary quite a bit in different areas of the country. A resident of New England might be paying $2.70 per gallon for gasoline and $2.95 per gallon for heating oil while a resident of Southern California might pay $3.05 per gallon of gasoline and $2.80 per gallon of heating oil. The point is, the most influential factor that determines how much you pay for gas and heating oil is where you live.

As for prices in the Northeast region right now, it seems that heating oil is more expensive than gasoline in most areas. There are two basic explanations for the current situation:

Supply and demand. Over the last few months, government statistics have repeatedly shown a steep drop-off in American demand for gasoline. Because of the tough economic times, Americans are driving less and therefore using less gasoline. Because demand for gasoline is historically low, oil companies are forced to lower retail prices to make sure they are still attracting customers. On the flip side, temperatures are dropping throughout the Northeast and winter is coming soon, so people are using more heating oil than they did three or six months ago. Higher demand for heating oil means that oil companies (both wholesalers and retailers) can raise their prices and still keep customers. In the summer of 2009, when Americans will be driving more and heating less, prices will most likely shift in the opposite direction.

Vertical consolidation. In the case of gasoline, most oil companies have what I call “pump-to-pump” control of the product. A huge multinational corporation like Shell owns the oil pump that extracts crude from the ground in Nigeria or the Middle East, owns the refinery that makes gasoline from the crude, and owns the pump that you use to put unleaded gas in your car. One company controlling the product through the entire production and retail process means the retail price is insulated from outside influences mainly profits taken by middlemen. Shell may be currently selling gasoline at a break-even price or even take some losses in order to keep sales up. When gasoline demand increases again (which it almost certainly will–the only question is when), Shell can then raise prices and recover most or all of the losses they incurred during the current low-demand period.

The extraction, buying and selling, and market trading of crude oil and its products like gasoline and heating oil are all incredibly complex processes. Although the simple explanations offered above to provide some insight as to how and why prices change, they cannot completely explain, much less predict, oil price trends.

Today, the New York State Energy Research and Development Authority released its data for average heating oil prices across New York State from last week.  HEAT USA prices for four regions were significantly lower than the NYSERDA average.  HEAT USA member prices were $0.40 to $0.80 lower per gallon in New York City, on Long Island, in the Lower Hudson Region, and the Western Region.

Members, contact the HEAT USA Membership Service at 1-800-660-4328, 9 am to 9 pm weekdays, to find out your dealer’s price for the day.  Non-members, call 1-888-432-8872 to find out more about how you can save on heating oil with HEAT USA.

As the winter approaches, millions of homeowners around the country are bracing themselves for another expensive heating season. Although heating oil prices are currently on the decline, consumers will pay as much as 50% more for their heating oil this year than they did last year. Making small improvements to the infrastructure of your home (”winterizing” or “weatherizing”) and basic changes to your heat usage patterns can save you hundreds of dollars per winter on your home heating costs–enough to offset the rise in heating oil costs all together. Here are seven simple and inexpensive steps you can take right now to reduce your heating costs all winter:

1. Seal Up Your Home
The number one cause of excessive heating costs is cracks and holes in the walls, floors and ceilings of your home that allow heated air to escape and let cold air in from outside.
These air leaks occur anywhere the inside of your home connects directly to the outdoors: doors, windows, clothes dryer vents, attics and lofts. For doors and windows, a simple and cheap process of blocking up gaps called weatherstripping can save 15% on heating costs. Lowes.com has a great step-by-step guide for do-it-yourself weatherstripping. For smaller holes and seams (such as the space where your dryer vent fits into the wall), simple caulking with silicone or acrylic caulk will do the trick. For detailed instructions on caulking, check out repair-home.com. Attic stairs and fireplaces are also common areas of heat escape–simple draft stoppers and covers can be purchased for those spaces.

Materials:
Caulking gun - $7
Tube of Caulk - $15
Weatherstripping (per room) - $30
Fireplace Draft Stopper: - $55
Attic Stair Cover - $30

2. Insulate!
Insulation helps hold heat in your home, and can make a huge difference in your heating bills. Check the insulation in your attic, basement and any other space where insulation is visible. If the existing insulation is old or thin, new insulation is worth the investment. Insulation materials are somewhat expensive, but, if installed correctly, can pay for themselves in energy savings in just one year.

Materials:
Roll of Insulation (50 sq. ft.): $50

3. Turn off Ventilator Fans and Put Ceiling Fans to Good Use
When ventilator fans in your kitchen or bathroom are used to suck smoke, steam, or odors out of your home, they suck out warm air too. Be sure to use ventilator fans sparingly, and turn them off as soon as they have done their job. Reverse the spin of ceiling fans (most fans have a small switch) and set them on the slowest speed to help send warm air down to the living area.

Materials:
none

4. Check Your Heating System’s Efficiency
Make sure your boiler is in working order before temperatures get really low. Check your heating ducts for leaks seal leaks or loose seams with shiny silver foil (UL-181) duct tape. Clean or replace any dirty air filters in your heating system.

Materials:
UL-181 Foil Duct Tape - $20
Home Heater Filters- $8 each

5. Be Smart With Heating
Use common sense to maximize your heating system’s efficiency. Only heat rooms that people are in and close doors and heating vents in empty rooms. Turn your thermostat down to 65 degrees Fahrenheit while you are sleeping or out of the house. If you have an analog thermostat, upgrade to a programmable digital thermostat. The digital thermostat will control the heat in your home more precisely for maximum efficiency.

Materials:
Programable Digital Thermostat - $100

6. Use Curtains and Blinds
The sun is a great heater, and it’s free! Keep your blinds and shades open (especially on south-facing windows) during the day to let sunlight into your home to help heat the air inside. Close all shades and blinds after the sun goes down to help keep warm air in your home.

Materials:
None

7. Control Hot Water Use
Check the temperature setting on your hot water heater, and make sure it’s set to “normal.” Wash your clothes in cold water whenever possible. Limit the length of your hot showers.

Materials:
None

Taking any one or, better yet, all of the seven steps listed above could save you hundreds of dollars on heating costs this year. For more detailed instructions on how to maximize your home’s heat efficiency and additional money-saving tips, check out these sites:

hearth.com
doe.gov
about.com
energystar.gov
boston.com
doityourself.com

Editor’s Note: This article first appeared in the September 29, 2008 issue of the HEAT This Week Newsletter

Newsday published a report last night on falling gasoline and heating oil prices in New York.  The article quoted the average price for heating oil on Long Island, determined by the New York State Energy Research and Development Authority (NYSERDA), as $3.617 per gallon.

HEAT USA price experts reported the average price per gallon for HEAT members on Long Island to be $0.50 lower than the NYSERDA average in the Newsday report.  Members can call HEAT USA Member Services at 1-800-660-4328 for specific price quotes for their area.

The Energy Information Administration (EIA), the statistical branch of the Department of Energy, released its Short-Term Energy and Winter Fuels Outlook report today.  The report was covered by many news organizations, including the Associated Press and the Wall Street Journal.  News agencies seized upon the harsh declarations in the report, particularly that “Average household expenditures for all space-heating fuels are projected to be $1,137 this winter (October 1 to March 31), a 15-percent increase over the estimated $986 spent last winter.”

Price experts and market watchers at HEAT USA found the report to be well-intentioned but misleading. “Unless you’ve been asleep for 12 months, you know energy prices have gone through the roof. What this report makes no mention of is that energy prices are significantly off their highs from the summer, and from the middle of last winter,” says Andrew Heaney, President of HEAT USA. “The good news is that EIA is finally doing their job–they are trying to prepare the American people for the worst.  But the truth is, in terms of heating costs, there’s strong evidence that suggests the worst is already behind us.”  Perhaps the strongest evidence that Mr. Heaney refers to is the trajectory of crude oil prices since this summer.

After reaching its all-time high of $147 in July, the market price for a barrel of crude oil has fallen consistently and hit an eight-month low of $89.75 on Monday.  Heating oil rose to record-high prices in July as well, causing panic in communities across the Northeast that led to some rash buying decisions (see the September 26th posting: “The Perils of Locking in Your Heating Oil Price”).  With the current economic crisis expanding beyond the US and into European and Asian markets, the outlook for the next few financial quarters, and perhaps the next few years, includes a potential steep decline in energy demand.  “With the world facing what could be the worst economic environment since the 1930s, with consumers everywhere cutting back on spending in every area from cars to electronics, how could manufacturing centers like China and India continue to increase their demand for oil at the rate they did over the last few years? They can’t and they won’t,” Heaney said.

Domestic energy demand in the US has been dwindling for months, and continues to decrease as the economy slows down.  Besides the moderate supply disruptions caused by hurricanes Gustav and Ike, this decline in energy demand remains the most influential factor on the price of oil in the current market.  In fact, slacking demand has led many industry experts to revise their ’sky-is-the-limit’ predictions for next year’s oil prices- most notably Arjun Murti of Goldman Sachs, who on September 19th cut back his 2009 price prediction from $140 a barrel to $110, according to the Economic Times.  Murti further acknowledged demand reduction patterns in the oil market as recently as last weekend, as reported by Rueters yesterday: “Oil prices increasingly appear unlikely to sustain a rally until global GDP expectations bottom,” he wrote on October 5th.  Translation: as the global economy declines, worldwide demand for oil will continue to shrink.  As demand lessens, crude prices will most likely continue to go down, taking heating oil prices with them.

To be sure, no expert analyst or government agency can actually predict where the price of oil will go in the next weeks, months, or years.  One would expect an already-unpopular president and Congress to be conservative in their estimates of coming difficulties for Americans, as any underestimation on the part of the government to become yet another example of their ineptitude in responding to a major crisis.  Average Americans will no doubt face substantial economic hardships as the current crisis intensifies.  By joining HEAT USA you’ve taken one of the most important steps to protect yourself–you’re better protected and informed than other heating oil consumers. And we’ll continue to work hard to keep you that way.

Even though heating oil prices have fallen continuously since summer, heating oil consumers are expected to pay 20%-30% more for heating oil over last winter.  This sizable increase in just one year will mean tough financial choices for many heating oil users throughout the Northeast.  As previously reported on The HEAT Zone, funding for the federal government’s energy assistance program LIHEAP was doubled by a budget bill Congress approved on September 25th.  Northeastern states also have programs that augment LIHEAP’s assistance, but some officials believe that the government help won’t be sufficient to a reach everyone who needs it.

That’s why community activists and non-profit organizations throughout the Northeast are stepping up to help out their neighbors.  In Shrewsbury, MA, a group of concerned residents formed Shrewsbury Oil Assistance Relief, “an emergency fund to help pay for oil for struggling families who run out during the night this winter,” according to the Worcester Telegram and Gazette.  The organization will focus on short-term relief for families while they seek additional long-term help from social service programs.  “This is what we have said all the time. Government can’t do this all by itself. We said we need help from the community,” said Selectman John I. Lebeaux.

The Salvation Army, an international charity, has also chipped in to help Massachusetts residents who may have trouble paying their heating bills–specifically those who don’t qualify for LIHEAP assistance.  The organization first established the Good Neighbor Program, a cooperative effort with Massachusetts energy companies, in 1983.  The program provides up to $275 per household per heating season to Massachusetts residents who may not meet the strict income requirements of state and federal assistance programs.  If  you are a Massachusetts resident who may need assistance from the Salvation Army’s Good Neighbor Program, call 800-262-1320 (serving area code 413) or 1-800-334-3047 (serving area codes 508, 617, 781, and 978).

In Wells, ME, a resident donated $10,000 to a local rotary club to sponsor a matching grant that will be used to help people with their winter heating costs, according to an article on Seacostonline.com.  “I do business with oil companies worldwide,” the donor, Karl Epper, said, “giving something back to the community where you live is not a bad idea. I want to help people keep warm in the winter.”

With a slow economy thinning out Americans’ wallets and high energy prices foreshadowing an expensive winter, a new criminal trend is emerging: heating oil theft.  A handful of cases have been reported since last winter, with new incidents in Mount Pleasant, PA, Brockton, MA, Sherrill, NY, and Jefferson, NH occurring in just the last two weeks.

Heating oil theft is a relatively new crime, according to most law enforcement officials, but one that will most likely to be seen more and more often as heating oil prices stay high.  “We’ve seen cases of firewood being stolen, but this is the first theft from a fuel tank,” said State Police Trooper Matthew Favreau, referring to the case in Jefferson, NH, and quoted in the Union-Leader.  “Given the fuel crisis and the economy, this probably won’t be the last one we see,” he added.  Heating oil theft is a crime that is difficult to pull off.  Thieves have to accomplish the long and possibly loud feat of siphoning or pumping the oil out of storage tanks without being noticed by residents or neighbors.  It appears likely that the need to operate without being seen or heard is the reason most of the thefts occur in rural and/or sparsely populated areas.  Homes and other buildings with above-ground tanks located outside and/or easily-located oil valves are particularly vulnerable.

To prevent heating oil theft, authorities have recommended heightened vigilance around tanks and valves, valve locks, and surveillance cameras.  Although the thefts are quite rare, heating oil consumers should be aware that they are occurring, and should be on the lookout for any suspicious vehicles near oil tanks in their neighborhood.

Heating oil customers know that the price of heating oil changes every day, even every hour.  With so many different forces influencing the price of heating oil–the price of crude, weather, location, and others–the price per gallon of heating oil can go up or down by a full fifteen or twenty cents in one day.  Market price for heating oil is currently 75 cents higher per gallon than one year ago, but a full dollar lower than two months ago.  This price volatility has become a reality of the modern heating oil business, and is the main reason that locked-in pricing is a risky choice.

The basic danger of locking in your heating oil price for any amount of time is that if the price of oil goes down, you are stuck paying a higher price.  Obviously, the inverse situation (being lucky enough to lock in a low price before prices take off on a long-term rise) is also possible, but there are other factors to consider.  In addition to tying you to a price, locked-in pricing agreements tie you to a contract–an agreement that, as soon as you sign on the dotted line, reduces your leverage in dealing directly with your heating oil dealer.  The price-lock contract guarantees you as a customer to the heating oil dealer for a certain amount of time (usually one year).  The contract eliminates your option of “voting with your feet”–seeking out a new dealer –if you are dissatisfied for any reason.  Of course you can get out of your fixed-price contract, but it will cost you a cancellation fee of several hundred dollars.  Furthermore, if your dealer has you on contract, he will be less concerned about losing you as a customer, which makes you a lower priority than non-contract customers when it comes to service and deliveries.  If a dealer is late for a service appointment with a non-contract customer, he risks that customer ordering from a different dealer for her next delivery.  If a dealer is late for a service appointment with a contract customer, he essentially risks nothing.

An article in today’s Ridgefield Press (Ridgefield, CT) shows an example of bad buying practices resulting in unnecessarily higher costs.  The Ridgefield school board made some unfortunate buying decisions that led to their paying an extra $250,000 to heat Ridgefield schools this winter.  Their loss was a direct result of this summer’s price spike–although the board had laid out a plan for regular buys dictated by time and not price-per-gallon, the record-high prices caused great concern that prices would continue to go up.  Shaken by this concern, the board abandoned their buying plan and made a large purchase at the near-peak price in late May.

Mark Kohan, a pricing expert and Membership Services Director at HEAT USA knows of a few HEAT members who made the very same mistake:  “When prices were so high earlier this year, we had a couple members leave the co-op to sign contracts that locked them in at $4.699 and $4.899 per gallon, plus the cost of service.  They were afraid that prices would keep going up.”  Now that prices have come down by about 70 cents per gallon, he says, “those same members are choosing to pay the $300 or $400 cancellation fees to re-join HEAT USA.  They looked at paying $4.89 per gallon all season and realized that, even after paying the cancellation fees, they would save money with the co-op.”

The best option for heating oil consumers is to rely on the assistance of pricing experts and consumer advocates provided by buying co-operatives like HEAT USA.  Membership in a large buying organization means professionals empowered with unique market information are watching prices on your behalf every day.  In addition, membership puts the full influence of tens of thousands of other consumers behind you, making you a high-value customer that dealers want to keep happy.

Yesterday afternoon’s post encouraged heating oil consumers who may need help paying their energy bills to apply to the government assistance program (LIHEAP).  The post also mentioned pending legislation that would double LIHEAP’s funding.

Today, Heat Zone is happy to report that the pending legislation has passed both houses of congress as part of a budget bill for the 2009 financial year.  Even though the country is in the midst of a financial crisis and the federal government is running an enormous deficit, congressional leaders recognized the crucial importance of LIHEAP, and made the doubling of its funding a priority.  President Bush’s budget plan included a $500 million cut in LIHEAP funding, but the increased funding written in by legislators ($5.1 billion in total funds) managed to double funding over last year.  In an article on crainsnewyork.com, Sen. Charles Schumer (D-NY) said he expected President Bush to sign the bill despite his previous plan to cut LIHEAP funding.

The increased funding is great news, but some state officials (like Maine Housing Director Dale McCormick, as quoted on fosters.com) are saying that it will still fall short of what is needed to provide help to every family that needs it.  So if you think you might need assistance, call 1-866-674-6327 (1-866-NRG-NEAR) today.

HEAT President Andrew Heaney feels the increases might be too little, too late: “The real need began last winter–Congress just completely missed it, and a lot of people got badly hurt. And even though prices have come down significantly, they are still enormously high by historical standards; the need is still tremendous. Still, it needs to be recognized that it is very good news that Congress has increased funding and ignored President Bush’s plan to cut funds. I urge all HEAT USA members to investigate if they are eligible, and make sure to apply as early as possible- the funds are dispersed on a first-come, first-served basis.”

Some approximate breakdowns of total increased LIHEAP funds, by state:
New York: $500 million
New Hampshire: $34 million
Maine: $47 million
Connecticut: $95 million
Pennsylvania: $194 million