Consumers Preparing for a Winter of Costlier Energy

ByHeesun Wee

N E W   Y O R K, Sept. 14, 2000 -- Fall hasn’t officially begun and the weather is still mild, but Gloria Dawson is busy helping families prepare for forecasted high energy prices this winter.

Dawson, who heads southeastern Vermont’s Community Action Agency, an arm of the U.S. Department of Health and Human Services, is helping low-income and elderly residents in this rural region prepare for expected eye-popping home heating oil bills.

The Department of Energy predicts heating oil will cost an average of $1.31 per gallon nationally at the start of the winter — almost one-third higher than a year ago. Natural gas is forecast to be 25 percent higher, at $8.59 per thousand cubic feet.

That’s why Dawson is buying as much heating oil as possible at fixed prices. She’s also helping families manage and settle remaining utility bills from the summer months before winter heating bills arrive. And in some cases, she’s even advising families to prepare a woodpile, just in case. “Enough to take them through a night,” Dawson said.

“There’s a lot of concern about what’s going to happen this winter,” she said.

Consumers Preparing Early

Like Dawson, many energy consumers across the country are bracing for predicted high costs for fuel, including home heating oil and natural gas. Homeowners are insulating their homes, replacing heaters and looking for price cuts — errands usually tackled in October.

Rozanne Weissman, director of the Alliance to Save Energy, a nonprofit group that encourages efficient energy use, is urging consumers to prepare for high fuel costs early.

“Get ahead of the curve. Everybody is going to be asking for the furnace repair person at the same time,” Weissman said.

Retailers who deliver fuel also are delivering the conservation message. “We’re telling retailers to start talking about conservation. We’re in this for the long haul,” said Jack Sullivan of the New England Fuel Institute, which represents oil dealers.

Focus on New England

Like last winter, New England is expected to be hit especially hard by high heating oil prices in the coming months, Weissman said. More than 50 percent of the region uses heating oil as its primary heat source, compared to 10 percent nationally, according to the Energy Information Administration (EIA), a statistical agency of the U.S. Department of Energy. The Mid-Atlantic states, such as New York, New Jersey and Pennsylvania, also are heavy consumers of heating oil.

The Midwest also is predicted to be hit by high fuel costs. About 75 percent of the area relies on natural gas as its main heating source, according to the EIA.

Low inventory levels of natural gas are complicating what some experts are calling an energy crisis. Recently, more natural gas has been diverted for power generation during the summer.

Price, Demand for Oil High

Hoping to reverse climbing fuel prices and avert a consumer scare over winter heating bills, the Organization of the Petroleum Exporting Countries agreed Sunday to raise its oil supply by 800,000 barrels a day, a boost in oil production by 3 percent.

Despite the new agreement, Wall Street analysts say the increase won’t have much immediate impact for consumers because a number of countries already were exceeding their quotas prior to the OPEC decision.

Meanwhile, previous OPEC production limits and the high demand for fuel amid a strong economy continue to fan high prices.

And depending on which weather report you believe, some experts are forecasting a “normal” cold winter that could push fuel prices even higher.

“We welcome the reports that OPEC-member governments will increase oil production by 800,000 barrels per day. Whether such an increase will stabilize the market remains to be seen,” said U.S. Energy Secretary Bill Richardson in a prepared statement. “We also are keeping all our options open to make certain that Americans can heat their homes this winter,” Richardson said.

Higher Airfares, Too

You don’t have to be a home fuel consumer to be impacted by higher crude oil prices.

Earlier this month, top airlines tacked on another $20 price hike on round-trip domestic tickets, blaming the increase on higher oil prices. The price jump is the second fuel surcharge of 2000, and boosts the total surcharge to $40 for round-trip tickets. Fuel is airlines’ second-largest expense after labor.

Paul Hudson, executive director of the Aviation Consumer Action Project, a nonprofit group that supports aviation consumer rights, says frequent business travelers who can’t take advantage of corporate airfare deals will be hurt most by the oil-related surcharges.

“The biggest impact for this is going to be on the so-called ‘road warriors’ working for themselves or working for small organizations. … It’s basically coming out of their hide,” Hudson said.

High Prices Go Back to 1997

The roots of the current high crude prices go back to 1997. At that time, energy experts forecasted oil demand would continue at a steady pace, and oil production climbed accordingly. But then Asian economies collapsed, and so did oil demand. Stockpiles of crude mushroomed, creating and oil glut and bargain oil prices at one point of $10 a barrel. Hoping to restore oil prices, OPEC then curbed production. The oil cartel now is trying to catch up with global demand for oil and restore low crude inventory levels.

“It’s a very unusual situation. It’s the backside of this wave that was created in the market in 1997 and 1998,” said Bob Tippee, editor of the Oil & Gas Journal in Houston, Texas.

“During the good times in 1998, you were getting energy for nothing,” Tippee said.

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