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New Englanders Locked Oil Price=Buyers Remorse

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  • #3300

    Charles Randall

    Buyers Remorse Chills New Englanders Who Locked in Oil Prices

    By Tom Moroney and Brian K. Sullivan
         Nov. 26 (Bloomberg) —
    Max Hartshorne was thrilled to
    lock in a winters worth of heating oil at $4.09 a gallon.
         That was in July. Now heating oil is $2.75 a gallon
    and Hartshorne cant break his contract with the dealer.
         I was just so angry, said Hartshorne, 50, who uses
    about 900 gallons of oil to warm his home in South
    Deerfield, Massachusetts, each winter. I said, You guys
    cant be serious about $4.09 a gallon. And he said to me,
    Were deadly serious.
         Buyers remorse is afflicting tens of thousands of
    customers in New England, where heating oil is used more
    than in any other U.S. region. Their eagerness to nail down
    a guaranteed rate backfired when oil prices fell.
         There was a belief that heating oil could rise to $6
    or $7 a gallon, based partly on predictions by Goldman
    Sachs Group Inc. and billionaire oilman T. Boone Pickens,
    said Matt Cota, executive director of the 120-member
    Vermont Fuel Dealers Association in Montpelier.
         Some dealers had lines out the door, Cota said.
    People were coming in with their checkbooks to sign
    contracts. There was a palpable panic in the cold-weather
         Goldman analysts forecast Aug. 15 that crude oil would
    trade above $145 a barrel by mid-November. Pickens said
    Aug. 19 that oil was unlikely to fall below $100 a barrel.
    Crude for January delivery closed at $50.77 yesterday on
    the New York Mercantile Exchange.
         Hay Rosser, a spokesman for BP Capital LLC, said in an
    e-mail that Pickens wasnt immediately available to
    comment. Goldman Sachs oil analysts also werent available,
    said Fiona Laffan, a company spokeswoman.

                            Got Suckered

         In hindsight, we got suckered, said Terry Moran,
    59, owner of Hugh Duffy Coal & Oil Co. in Rutland, Vermont.
         Forty-four percent of the 5.5 million households in
    Connecticut, Maine, Massachusetts, New Hampshire, Rhode
    Island and Vermont use heating oil, according to government
         Connecticut alone has 682,000 oil customers, with
    about 112,000, or 16 percent, locked into a price,
    according to the Independent Connecticut Petroleum
    Association in Cromwell.
         Fixed-price contracts establish a price for the entire
    season, while capped contracts set a ceiling. Both have
    been offered since the 1980s and are used in New York, New
    Jersey, Pennsylvania, Virginia, Maryland and Delaware as
    well as New England, said Peter Beutel, president of energy
    consultant Cameron Hanover Inc. in New Canaan, Connecticut.
         Pat Boucher, who helps her father run Dunn Oil Co. in
    Maynard, Massachusetts, said shes fielding as many as 10
    complaints a day.

                             Not So Smart

         If oil were at $6 a gallon now, our customers would
    have thought they were real smart, said Boucher, 50.
    They dont think theyre real dumb now
    : They think
    theyre being ripped off.
         Springfield, Vermonts town manager, Robert Forguites,
    bought 250,000 gallons of heating oil at a little more than
    $4 for the public school system.
    He could have saved
    several hundred thousand dollars for the community of 9,000
    people if he had bought at todays price.
         I am angry at myself, Forguites said.
         Oil retailers say theyre in the same bind.
         We feel your pain, as we are feeling it too, Dunn
    Oil tells customers on its Web site. The company is locked
    into unfavorable rates with its own suppliers.
         Were stuck just like theyre stuck, Boucher said.

                           Access to Credit

         Dealers are further hurt by the freeze in credit
    markets, said Eugene Guilford Jr., executive director of
    the Connecticut trade group. In the past, dealers obtained
    loans to ease cash flow after paying their suppliers and
    waiting for payment by customers.
         Guilford met with Treasury officials in Washington
    last week on behalf of nine New England heating oil trade
    groups. The dealers are submitting a list of local banks
    that have denied them loans, asking the government to
         Were not looking for a bailout, Guilford said.
    These are loans.

                          Long-Term Savings

         For consumers, fixed-price contracts generally save
    money over the long term, dealers said.
         Anyone who has done a pre-buy for the last 19 years
    is far ahead of the game financially,
    Moran said. Even
    if they pay two bucks more a gallon this year.
         Most customers dont buy insurance guarding against an
    oil-price decline because it can cost 20 cents to 50 cents
    a gallon, said Jamie Py, president of the 220-member Maine
    Oil Dealers Association in Brunswick.
         Some fixed-price customers are cheating on their
    contracts by purchasing cheaper oil from another dealer,
    Guilford said. Others are burning more wood in the
    fireplace or stove to offset the use of furnace oil, said
    David Young, town coordinator for Warwick, Massachusetts.
         The terms and language of fixed-price contracts vary,
    Py said. Most allow the dealer to recover expenses from
    customers who renege or dont take the entire amount of
         No one wants to take a customer to court, Py said.
         Some customers acknowledge that they made a bad
    decision and accept the consequences.
         You make the deal and you stick by it, said Ted
    Cady, 69, of Warwick, who locked in a price of $4.99 a
    gallon in June. And sometimes that sucks.
         Peter Geiger, editor of the 191-year-old Farmers
    Almanac in Lewiston, Maine, said he pre-bought heating oil
    at $4.12 a gallon. Its a double whammy, based on the
    publications winter weather forecast, he said.
         Snow in November, snow in April and snow in
    between, he said. Winter, winter, winter. And numbingly


  • #6432

    Charles Randall

    Here is another example/ good reason not to take anything either T. Boone Pickens or Goldman Sachs says about Energy/Oil predictions seriously. (Gives you great feeling former Goldman Sachs “looter” is heading Congress Bailout Plan also!)
    East Coast fuel oil buyers are stuck with $4.09/gal price in $2.75/gal market & as article mentions serious buyers remorse!

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