High Heating Costs: A Ticking Time Bomb?

June 25, 2008 — -- Frank Borowski is not looking forward to heating his Massachusetts home.

Borowski, 41, a construction estimator in Southampton, said that his heating oil bill for this winter could top $3,000.

"I'm going to be broke in a while like everybody else," he said. "I don't know where else to cut. The people in the Northeast are getting a double whammy with gasoline prices along with heating oil."

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Soaring gas costs are the most widely reported consequence of this year's record-high crude oil prices. But homeowners, not just motorists, have reason to be concerned: Home heating oil, like gas, is refined from crude oil and prices for home heating oil are also skyrocketing.

For the 12-month period ending in March, the price of home heating oil jumped more than $1.35 per gallon to $3.85, according to the federal government's Energy Information Administration. In Massachusetts, the price of heating oil this month is $4.59 a gallon, according to the state's Division of Energy Resources.

The surge is especially disconcerting for homeowners and heating oil dealers in the Northeast, where 73 percent of the country's heating oil is consumed.

Sandra Farrell, the owner of Northboro Oil Co. in Northborough, Mass., Wednesday told a the U.S. Senate's Committee on Small Business and Entrepreneurship that a typical heating oil delivery last year cost her customers $500. This year, she said, it will cost at least $850, or 70 percent more.

"It is very tough looking into the eyes of these customers when they ask me what I think they should do," Farrell said in testimony prepared for a committee hearing on heating oil. "I don't know what to tell them.

"For the first time," she said, "I think some of my customers are going to have to choose between main essentials like groceries, gasoline, warm clothes and heating oil just to pay the bills."

The committee also heard from David F. Johnson, the Deputy Assistant Secretary for Petroleum Reserves at the Energy Department, who said that the Bush administration hopes that increased production of oil domestically will lower prices for Americans.

But Sen. John Kerry, D-Mass., the chair of the small business committee, challenged Johnson, criticizing the Bush Administration for not doing enough to "wean us off foreign oil."

Kerry said the skyrocketing price of oil and its effect on home heating oil later this winter is the equivalent of "a bomb ticking underneath us right now."

He said in prepared remarks Tuesday that the first step to helping families cope with rising heating oil prices should be providing more funding to the federal government's Low Income Home Energy Assistance Program. (President Bush's budget proposal for 2009 recommended a cut of $570 million in funding for LIHEAP, while Democrats in Congress passed a budget this month providing an extra $3 billion for the program.)

He also called for "an aggressive state-federal partnership" to help consumers replace or upgrade boilers to make their homes more energy efficient and reduce their consumption of heating oil.