Energy experts from around the state say a business is gambling whether it
decides to lock into a contract laying out a set price for oil heat through
the next year, or pays the price the market dictates over the winter months.
Peter Lombardi Jr., executive director of the Rhode Island Oil Heat Institute, a nonprofit trade association, said understandably it’s a volatile market for oil now.
“It’s upsetting to the dealer who wants to get the best deal for their customers,” Lombardi said.
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According to the state Energy Office, last winter in Rhode Island the high for home heating oil reached $1.99 per gallon. Over the same period, the low was $1.39 per gallon. The difference could add up to hundreds of dollars over the course of the winter for a homeowner or small-business owner.
The good news is that Rhode Island is in secure shape when it comes to reserves. Lombardi said federal strategic reserves for the six New England states are still being stored at Rhode Island facilities.
Janice McClanaghan, chief of energy and community services at the Energy Office, said she hasn’t been hearing much from the public, but expects that’s because for most consumers, the warm weather of the recent Labor Day weekend is seemingly much closer than the first frost of winter.
“It’s probably going to be on the high side,” said McClanaghan, noting that prices a month ago were $50 a barrel and are still in the $40 range. “You just don’t know with so many variables,” she continued. “Locking in a price, there’s always the worry that you’re going to lock in too high. But no one’s buying right now and the prices are still high.”
James Grasso, president of Silent Sherpa Energy Consulting & Professional Services, a Cranston business that specializes in providing assistance to organizations with energy concerns, pointed to the war in Iraq, the bankruptcy of Russia’s largest oil provider and a problematic hurricane season, which has led to the disruption of oil shipments, as all being major contributors to the industry’s uncertainty.
“If something tragic were to happen, then we’re looking at prices potentially going through the roof,” Grasso said. But he said the only real reason for locking into a contract would be for someone on a strict energy budget, who would want to secure a price so that heating costs, though likely not at their cheapest, would be a set expense through the winter months. “If you’re looking for price certainty, then now’s as good a time to lock in as any,” he said.
But Grasso expects to see prices to continue to fall, at least in the short term, though again noting that the long term is much harder to predict. And he said businesses and homeowners who don’t have to lock into a price, probably shouldn’t, as long as that’s a risk they’re willing to take and could absorb higher prices.
Attorney General Patrick Lynch said his office’s Consumer Protection Unit (which can be reached at 274-4400) receives dozens of calls throughout the winter months, often from residents complaining about heating contracts they’re locked into. Besides cautioning Rhode Islanders that they don’t have to allow oil companies to automatically renew their contracts, Lynch said before businesses and homeowners lock in rates for another year, they should consider whether a contract includes a fixed price or is a variable price program and whether a fixed price is guaranteed. The hours of an oil company’s operation, the penalties for breaking a contract and whether a company offers discounts to senior citizens or other groups are also important issues.
“A lot of it is common sense and basic knowledge,” Lynch said. “But the majority of the calls we get are from people who say they never thought a problem would happen to them.”
Lynch, who’s a proponent of locking a rate in now, has been shopping around for the best price for heating his own home and stressed the importance of choosing a deliverer with a solid reputation.
“In the middle of the winter, in the middle of the night when things go wrong, that’s when you need somebody that can be depended on,” he said.
Lombardi agreed, saying that people should absolutely consider whether an
oil company “has come through for them in the past … that makes the gamble that
much safer.”
