Heating Oil Dealers Say Oil Prices Too Volatile
More heating oil dealers in Pennsylvania are refusing to offer pre-paid oil contracts because of volatility in oil markets and unpredictability of prices.
Heating oil prices are now between 60 cents and $1 a gallon more than they were this time last year, readingeagle.com reports.
Historically oil prices are low at this time of year before beginning their seasonal climb during winter. That has enabled customers to lock in cheaper oil deals early in the season to guard against spiking winter prices.
But some dealers and a US Energy Department economist say current prices are artificially high and could even drop in the near term if demand falters and investors decide to pull their money from oil markets. That could burn homeowners who have locked in pre-paid oil contracts expecting the normal seasonal spike.
Craig Priebe, vice president of heating oil company Penn Pride, said customers last year could prepay for heating oil for the entire season at a locked in price of $2.54 per gallon.
“This year I’m not even offering a prepaid price because I think the current price is artificially high,” he said.
Priebe said if he allowed homeowners to buy oil at last week’s market price of $3.34 per gallon and prices later tumbled, he would have a lot of unhappy customers.
By December last year, the company was charging $2.90 a gallon for 150 gallons or more. That meant customers who had locked in the $2.54 price in September were happy. Heating oil prices rose steadily through winter until the price hit $3.50 at the end of April.
But instead of dropping back in May and June, prices have continued to climb this year for no apparent reason, he said
“In my mind, oil isn’t worth $1 more this year. You used to be able to predict how prices would perform. Those days are over.”
Energy Information Administration economist Neil Gamson said fears about global oil supply and burgeoning demand from the likes of China and India could force oil prices higher this year. However worries about the faltering global economy could also move prices down.
“There has been a lot of economic disappointment in the US, Europe and other places that can drive prices lower,” Gamson said.
The EIA is forecasting heating oil prices to rise this winter, reaching $3.74 per gallon by Dec. 31 and ending the heating season at a $3.95 per gallon high by March.
HeatingOil.com has also reported that strong overseas demand for distillate fuels is also driving the price of heating oil up.
But despite the official price outlook, Mohnton-based heating oil company I.H.S Fuels owner David DeGezell is also refusing to offer pre-paid prices this year, or advising homeowners when to make their oil purchases.
“The market is too volatile,” DeGezell said.
He had given up trying to predict which way heating oil prices would go this winter.
“You don’t know what the market is going to do this afternoon.”
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