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Presiding Officer William Lindsay Image: Newsday.com

William Lindsay, presiding officer of the legislature for Suffolk County, NY, recently introduced two bills that would affect heating oil contracts between retailers and consumers in the county.  The first bill would declare void any heating oil supply contracts that were not agreed to in writing.  The second bill would create a county website listing the wholesale prices paid by heating oil companies and the retail prices they charged their customers.

Lindsay cited many county residents finding themselves locked into “unfair” contracts with high cancellation fees as reason to enact the legislation.  He believes that some consumers may have been confused by the terms of a contract they agreed to over the phone, and suggested that requiring written contracts would prevent such confusion.  “Getting locked into a contract they don’t understand over the phone is just wrong, and I want that practice to end. Consumers need to understand what they are getting into and requiring written contracts is the best way to do that,” Lindsay said, quoted in The East Hampton Press and The Southampton Press (article available at 27east.com).

Lindsay also asserted that the online price information site would give local residents a better idea of price ranges for heating oil and help them find the best deal available in their area.

Thousands of heating oil consumers throughout the Northeast have felt the sting of price cap or price lock-in contracts they entered into over the summer, when heating oil prices peaked along with the price of crude (covered here on September 26th and October 23rd).  Startled by the rapid rise of heating oil prices in July and August, many consumers locked in prices at $4 to $5 a gallon or higher for fear of an endless upward price spiral.  Heating oil prices began to fall in September, and retail prices in most areas of the Northeast are now around $3 a gallon.  Several state and local officials have addressed the issue, including Maine Attorney General Steven Rowe, who in November reminded Maine residents that written heating oil contracts are legal documents and signers of the contracts are legally obligated to honor their terms.  He also explained that retailers purchase oil as soon as contracts are agreed to, which means that most dealers paid comparably high wholesale prices for the oil that consumers are paying locked-in retail prices for.  Such written contracts in Suffolk County would likely not be affected by the proposed legislation, which applies to unwritten oral contracts.  Senator Charles Schumer (D-NY) and Westchester, NY County Executive Andrew J. Spano both called for government help for residents locked into unfavorable contracts, but no new policies or legislation have been enacted since their statements in October.

The Press publications articles report apparent widespread support for the bills in the Suffolk County legislature.

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.

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