In July of this year, the price for a barrel of crude oil hit $147, its all-time high. As of this morning, crude oil was selling for less than $43 a barrel, a 70% decrease in just five months. Start with one of the biggest price swings in history, add an emerging global recession, and you’ve got the perfect recipe for complete unpredictability for the future of oil prices. Most analysts agree that the plunge in oil prices is closely tied to the recession, which means that when the global economy starts to recover, oil demand will shoot back up, taking prices up with it. Of course, no one knows when the recession will wind down, and the recession could get worse before it gets better. Merrill Lynch has predicted that the price of crude could drop below $25 a barrel in 2009 if the recession spreads to China. With so much uncertainty in the oil markets, what’s a heating oil consumer to do? How do we plan for a future where heating oil could cost anywhere from $2 to $5 a gallon? As always, HEAT This Week will continue to survey the news and provide our readers with as much information as possible on what to expect.

For this edition, HEAT This Week decided to look to Andrew Heaney, president of HEAT USA and a 15-year veteran of the heating oil industry, for some answers about where crude and heating oil prices will be in the next months, years, and decades, as well as some other questions relating to the energy sector. The following Q&A session was the result:

HEAT This Week: Over the last four months, the price of crude oil has hit its highest price ever ($147 per barrel, in July) and and its lowest price in over three years ($42.65 per barrel this week). Have you ever seen such huge price swings in such a short period of time?

Andrew Heaney: No, it is unprecedented. We’re living through an historic time right now and the activity in the energy markets is breathtaking. When I started at HEAT, it was a huge deal if the price of heating oil changed a penny overnight. Now it can change 15 cents in an hour. The good news is that for now at least, I think we can expect some volatility, but much lower prices for the next year or two.

HTW: Most analysts and business news organizations agree that the main cause of falling oil prices has been decreasing demand resulting from the global recession. Are there any other major causes you can point to?

AH: The drop in demand is a big factor, but much of the run-up in prices over the last year had to do with a perceived supply/demand crunch that was coming- not one that had arrived. So a lot of the increase in prices had to do with psychology and perception. In my view, the threat of a supply/demand crunch in the future is very real, and likely in fact, but not right now, or even the next few years. The market has finally bowed to that reality, and the result has been nothing short of a price crash, which is clearly very good news for consumers.

HTW: Since the price of oil has dropped so quickly, could it return to its peak price just as quickly? Where do you see the price of oil going in the next year or two?

AH: If there is one thing I know after watching the energy markets for 15 years, it is that I know very little. But my considered opinion based on observations here at HEAT and conversations I’ve had with some very smart energy analysts is that no, we are not going to see that peak price again in the next three years. I think the price of oil will hover between $30 and $70 for the next couple of years, with a good amount of volatility due to geopolitical events, not economic ones.

HTW: What is your prediction for the price of crude oil 20 and 50 years from now?

AH: I don’t know! However, I do believe that as our global economy develops, crude oil and its refined byproducts will increasingly be phased out by developed countries, and even countries like China and India. I believe that the recent price spikes combined with global efforts to combat climate change mean that crude consumption in 30 years will be flat to lower, so short term I am bearish, medium term bullish and long term bearish.

HTW: It’s been widely reported that low oil prices have reduced interest and investment in alternative energy technologies like electric cars and wind- and solar-generated electricity. Do you think developing such technologies is still possible during times of cheap oil?

AH: Yes but it is much more difficult. This is the major downside to the drop in prices, just as it was the only silver lining during the price spike. I think the price crash will be very discouraging to investment in alternative technologies unfortunately. That being said, I think it is very possible that there could be a game-changing technology that emerges in the next five to ten years. My guess would be it will be in battery technology- which will make things like solar and wind truly competitive. It could also come from the field of biotechnology, where right now they’re working on creating microorganisms that will eat garbage, corn stalks, wood chips, etc. and turn them into fuel. If someone comes up with the right bug, or the right enzyme, or the right battery, things will change quickly.

HTW: What policies do you expect President-Elect Barack Obama to enact when he takes office to reduce America’s dependence on foreign oil?

The biggest new source of energy available to America is energy that we don’t use- so I think conservation is key. There are three big areas of energy consumption in our country- transportation, power generation and heating. I think the President and the Congress could do a lot to motivate every sector of American society to conserve- higher CAFE standards for cars and trucks, new power plants, smart grid technology, carbon cap and trade–there are lots of places for them to help reduce U.S. demand.

HTW: A recent Reuters article reported that many Americans are continuing to take steps to conserve heat and energy in their homes, despite lower energy costs. Do you think this may be the beginning of an era of conservation in the U.S.?

AH: I think something very significant took place in the American psyche over the last few years. Paying that much money for everyday necessities was just nauseating. You don’t forget that. So I do think we are in the midst of something new- electric cars, efficient heating systems, new technology, etc. If American consumers are going to buy something right now, they are going to buy things that promise to save them money. I think they will be very interested in products that offer a fast return on their investment, like efficient heating systems and cars.

HTW: The HEAT Zone blog has listed many ways to conserve heat at home. Are there one or two easy and inexpensive measures you would recommend as the most important?

AH: The best thing you can do is install digital, programmable thermostats in your home. They will save you a ton of money by matching your energy usage to your lifestyle: low temp when you’re asleep or at work, warm when you’re at home. And the second thing is heat loss–go through your house and check your windows and doors for drafts, plug holes in your basement that might be letting cold air in, insulate your hot water pipes, etc. It’s easy to do, it’s cheap, and it gives you a big savings on your energy bill.

NOTE: This article first appeared in the HEAT This Week Newsletter on December 5, 2008

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!

Fall is here, and with budgets tight and temperatures dropping, it seems like everyone on the Web has tips on how to save on heating and energy bills.  As a supplement to last weeks post on the Zone, check out this Google blog for more energy-conserving and money-saving ideas.  Many of them were already covered in the “How to Winterize on a Shoestring” post, but there are some new thoughts, plus an energy calculator to help determine exactly how many dollars simple conservation measures can save you this year.

The New Jersey utility PSE&G also offers some good tips in an article on aol business.

If you haven’t already, it’s time to take care of those winterizing projects–before the weather gets really cold.

Sen. Chuck Schumer Photo: nypost.com

Senator Chuck Schumer (D) of New York called a press conference Sunday, during which he stated that heating oil prices are not falling as fast as crude prices, and that greedy Big Oil is to blame. Citing his own research (most likely done by his staff), Schumer noted that the price for a barrel of crude oil has dropped by 50 percent since its peak price in July, while the price of heating oil has only dropped 12 percent in the same period of time (source: newsday.com).  He also noted that gasoline prices had dropped more than heating oil prices (23 percent since July), but that gas prices are “still not where they should be.”  He called for the Federal Trade Commission to warn oil companies across the country to lower their heating oil and gasoline prices to match crude prices or face “stiff penalties.”

Schumer has been a longstanding ally of heating oil consumers. No matter your politics, you must acknowledge that he has brought heating oil issues to the fore of national discussion on more than one occasion, and has been instrumental in securing additional HEAP funds for low-income households in the State of New York.  In this case, his statistics shed light on a frustrating reality: the price of crude has dropped tremendously over the last four months, and heating oil and gasoline prices have only declined modestly.  While oil companies’ hunger for profits is certainly one explanation for this situation, it is not the only one.

Heating oil and gasoline tend to follow the same price trends as crude because crude is the main ingredient in both fuels, but the correlation among the three is not directly proportional or even consistent.  It is important to remember that crude, heating oil, and gasoline are all traded as separate commodities on the New York Mercantile Exchange, and therefore go through independent buying and selling cycles.  Furthermore, heating oil and gasoline have opposite demand seasons, with demand for heating oil trending upward in the winter and demand for gasoline trending upward in the summer.  Also, the production and distribution channels of heating oil and gasoline are very different.  Huge multinational oil companies manufacture heating oil from crude and then sell the heating oil to local distributors around the country, who then sell the oil at retail prices to consumers.  Gasoline is a different story–”Big Oil” companies like Shell and Exxon control the gas from the crude pumps all the way to the gas pumps–the producer, manufacturer, and retailer are all the same company.

Decades of collective experience have taught the HEAT USA price team that today, the only dead-certain prediction in the price of heating oil is uncertainty.  It’s this uncertainly that led HEAT USA to create the Fair Price Protection Program, which limits how much heating oil providers add to the wholesale price when setting daily retail prices.  HEAT USA members are assured that, if the market price of wholesale heating oil drops, their retail prices drop immediately.  Under Fair Price Protection, heating oil retailers’ profit margins are fixed to a specific number of cents per gallon.

Whether or not Senator Schumer’s call for action is heeded by the FTC, the crude oil and heating oil markets will continue to bounce up and down in the coming months, and the best and most reliable support for consumers is the support of large buying groups like HEAT USA and the guarantee of fair prices that they provide.

HEAT USA was the subject of a special report on heating oil co-ops in the Philadelphia Inquirer last week.  The report traced HEAT from its humble beginnings in Queens to its current status as the largest co-op of its kind in the country, serving 80,000 people throughout the Northeast.

The report credited “old hippies and trade unionists” with creating co-ops like HEAT USA and winning lower prices for middle class consumers.  HEAT president Andrew Heaney offered some clarification of the co-op’s origins: “I think ‘hippies and trade unionists’ is a kind of wry reference to the fact that many of the first attempts at forming co-ops were made by consumer advocates like Ralph Nader and other left-leaning folks.  The heating oil co-op was actually a market response to the oil shocks of the 1970’s; the real driving force behind heating oil co-ops then were consumers who wanted to take control of their energy costs, which is still true today.”

Recent instability in energy prices and a major economic meltdown has driven more heating oil customers to seek out the stability and support of HEAT USA than ever before, with over 3,500 members signing up in the last two months alone.

High unemployment, low temperatures, and higher energy costs will hit families hard all over the country this winter. According to the National Energy Assistance Directors’ Association (NEADA), the average cost of energy for one household in a one-year period is expected to rise to $1,152 this year, up from $986 in 2007 (a 17% increase), as reported in an article at Stateline.org. HEAT USA members and other residents of the Northeast who might have trouble paying heating oil, electricity, and/or gas bills this heating season are encouraged to apply for government assistance right away.

People who believe they might need government assistance to pay their home energy bills should call the National Energy Assistance Referral (NEAR) project hotline at 1-866-674-6327 (1-866-NRG-NEAR), or send an email including their city, county and state to energyassistance@ncat.org . Operators will help applicants determine if they are eligible for the Low Income Home Energy Assistance Program (LIHEAP) in their state. Eligibility qualifications are based on the number of persons per household, income level, area of residence, and other more complex factors, so the best way to determine if you and your family are eligible for assistance is to call the toll-free number, 1-866-674-6327. Beneficiaries of LIHEAP program (“grantees”) would receive assistance from the federal government in the form of direct payments to their energy providers (including heating oil suppliers).

Although leaders in congress from both parties have included the largest-ever LIHEAP funding package ($5.1 billion) in the fiscal year 2009 budget bill, economic woes and a bloated deficit may force stiff reductions in funding, reducing the number of families who would receive LIHEAP benefits. So if you think you will need help paying your energy bills this winter, increase your chances of receiving assistance by calling 1-866-674-6327 today.

This summer two separate bills, H.R. 6321 and H.R. 6473, were introduced to the House of Representatives. Both bills, if they became law, would provide relief from high energy prices and supply problems for residents of the Northeast.

H.R. 6321 (also called the “HEATR bill of 2008″), introduced by Rep. John McHugh (R-NY), would provide a tax credit to individuals and families to the tune of $500 or 33% of one year’s energy costs. The credit would be limited to households making less than $100,000 per year.

H.R. 6473, introduced by Rep. Paul Hoades (D-NH) would require the Secretary of Energy to sell off heating oil from the Northeast Home Heating Oil Reserve under specific circumstances: (1) if a major disruption in energy supply occurs, and (2) if the retail price of heating oil reaches $4.00 per gallon

Both of these bills are still in the first phase (”introduction”) of the legislative process, and may not even move beyond the committee phase to be voted on by congress. If one or both of the bills did become law, however, they would form a nice safety net under HEAT USA members and others who rely on heating oil to keep warm during the winter. The Heat Zone will keep track of both bills when and if they move through the legislative process.