Oil Heat Cost Savings, Comparison to Gas

Dear Oilheat Customer,

World energy prices have certainly grabbed the spotlight lately. With crude oil prices topping $50 a barrel and gasoline prices exceeding $2 a gallon, the headlines have not been very comforting.

Oilheat customers have been feeling the pinch as well. Higher delivery prices and monthly statements are affecting everyone s wallets.

We know you have some questions as we approach the next heating season and we hope this guide will provide you with some answers.

Why are homeowners paying
more for heating oil?

The price that oil dealers pay for oil they sell to you (the wholesale price) 1S over 65% higher than it was last year at this time, including oil they are buying now for winter deliveries. This has put dealers across the country in a difficult situation. No dealer wants to pass on this expense to customers, but shouldering the added burden would put even the largest companies out of business.

Wholesale Heating Oil Prices

As you can see wholesale rices are over 65% higher than they were last fall.

What is causing prices to rise?

Cost ofthe raw product has gone up...

Crude oil accounts for 50%-80% of the wholesale cost of a gallon of heating oil. And as of October 2004, the price of crude oil is up 77% over last year.

...because world demand is higher...

Rapid industrial development in China, India and other developing countries, combined with the economic recovery in the U.S., has resulted in a greater demand for oil. World energy demand hasn't risen this fast since 1996, says the International Energy Agency.

...and investors are staying skittish.

In the commodities market, even a perceived change in conditions causes a heavy volume of buying and selling. Oil traders estimate that unrest in the Middle East has added a "risk premium" of $4-$8 to the price of each barrel of crude oil (The New York Times, 5/16/04). And the hurricanes that hit the offshore
drilling rigs in the Gulf of Mexico increased concerns even further.

What is my best Option

The Consumer Energy Council of America says the best way to cut your heating costs is to improve your heating system's efficiency. Homeowners who switch away from oilheat can lose thousands of dollars through installation and conversion costs.

Modern oilheat systems can reduce the cost of heating your home by up to 40%!

How long will prices stay like this?

We wish we had better answers. The energy market is so volatile right now that heating oil prices have gone up and down 10 cents a gallon or more in as little as three days.

If real disruptions do occur in the Middle East, crude oil prices could rise even higher. If current fears prove unfounded, or if supply increases, crude prices could plummet, which would eventually cause heating oil prices to drop as well. And of course, the weather will play a role during the winter because it affects demand.

People sometimes forget that over the last seven years, wholesale heating oil prices have twice dropped by as much as 17 cents per gallon in the winter. And in real dollar terms, the price of heating oil is half of what it was in the 80's.

Oil prices can actually fall in winter.

Wholesale heating oil prices have actually dropped as much as 17 cents per gallon during two of the last seven winters. Jan. 98 Jan. 99 Jan. OO Jan. O1 lan. O2 Jan. 03 Spr. 04

Staying with oil is a good idea

"The cost of switching is likely to be a complete loss. If you take steps to use less fuel...you will start saving money immediately and you will continue saving as long as you in the house."

Ellen Berman, President, Consumer Energy Council of America

What can I do about it?

Have your heating system serviced by an oilheat technician to increase its efficiency.
For even more savings, consider upgrading to a new oilheat system.
Use a programmable thermostat to automatically reduce temperature settings.
Check your home for drafts, which rob it of heat.
Remember the value of service and the personal relationship you have with your oil dealer:

When temperatures are frigid, service response and fuel supply matter much more than a temporary discount on the cost of fuel.

When prices and supplies are volatile, that's usually the worst time to start a new relationship with an oil dealer.

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