November 27, 2008 at 10:49 pm #3300
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.
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.
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
November 27, 2008 at 10:50 pm #6432
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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