The winter heating season is beginning with prices of heating oil up and climbing, while supplies are much lower than a year ago.
As of Oct. 19, heating oil was selling for an average of 85.9 cents a gallon in the mid-Atlantic states, up more than 12 cents a gallon from a year ago, according to the U.S. Department of Energy's Energy Information Administration.The mid-month price in the four-state region - Pennsylvania, Delaware, New Jersey, New York - was 2.4 cents above prices at the end of last year's heating season and 1.1 cents above prices of just two weeks ago.
A leading consumer group and EIA are predicting that prices will continue to rise and that they could shoot up dramatically if there is a sudden cold snap.
However, the American Petroleum Institute, an industry organization, believes that supplies are "more than adequate" and that sharp price increases are unlikely, barring some cataclysm in the Middle East.
Consumers can place their bets and take their chances. In other words, they can fill their tanks now if they are afraid of a sharp price increase, or keep them low at possible peril to their pocketbooks.
No one is predicting any sharp drop in oil prices.
"I'll be honest with you. As always, my crystal ball is very clouded," said Gene Waldman, a Philadelphia-area fuel dealer and former president of the Delaware Valley Fuel Oil Dealers Association.
"I really have no idea as to what to expect because of the nature of the beast. There are too many factors that affect the marketplace," said Mr. Waldman.
Things look pretty stable for now, he said, but then again, just like the weather, that could change.
"But realistically speaking, the market has been fairly stable, and I wouldn't really expect to see at this point any measurable change," he said.
"It might go up a few cents, only because of market conditions, weather conditions," he said. "That is nothing out of the ordinary that hasn't taken place in the last few years."
What's known for sure is that on Oct. 23, nationwide primary stocks of distillate fuel - heating oil and diesel fuel - stood at 123.2 million barrels, about 19 percent below last year's levels, according to EIA. Primary stocks are those held by refiners, at interstate pipeline terminals, and by importers.
In the four-state mid-Atlantic region, the drop is dramatic. As of Oct. 19, stocks were at 24.2 million barrels, down 37 percent from the end of October last year.
Joan Claybrook, president of Public Citizen, a Washington, D.C.-based consumer group, said last week that oil stocks were dangerously low and that homeowners should fill up their tanks.
If the weather turns cold quickly, oil will be hard to get and the price will go up, said Ms. Claybrook, whose organization was founded by Ralph Nader.
The low supplies are also occurring at a time when demand is up 9 percent
from last year and 31 percent from 1984, she said.
The low stocks are in the oil companies' best interest - "lower supply, higher demand, great prices," said Jason Adkins, national director of Buyers Up, a 15,000-member buying cooperative for heating-oil consumers and a subsidiary of Public Citizen.
"They didn't need to go beyond Economics 101 to master this one," said Mr. Adkins. "The profit motive is working to the advantage of oil companies, to the disadvantage of citizens and consumers."
Edward Murphy, director of statistics for the American Petroleum Institute, scoffed at Ms. Claybrook's concerns.
"I don't know what their motivation is, but their analysis is stupid and misleading," said Mr. Murphy. "I guess I would say (it is) more than misleading. I would say a disservice to consumers."
The problem with the analysis, Mr. Murphy said, is that only about 8 percent of the oil used during the heating season comes from those stocks.
Most heating oil comes right out of the refineries, and they can easily adjust their production to meet demand, even if the winter is very cold, said Mr. Murphy.
"You can't forecast the supply of milk by going into the supermarket and looking at the supply of milk on the shelves," said Mr. Murphy. "It is silly."
He said inventories are higher than they were in 1985, a year in which there were no great price increases.
Last year inventories were relatively high, he said, and that was because of the low price. Crude oil was selling for about $13 a barrel then, compared with $19.50 a barrel now, he said.
Mr. Murphy said that if the Nader groups wanted to know the real story, members need look no further than the New York Mercantile Exchange.
At the close of business on Friday, the wholesale-futures price for heating oil delivered in November was 57.46 cents a gallon, while oil sold for January delivery was 57.19 cents.
"The people who are making their living making bets are saying prices are going to go down a little bit," said Mr. Murphy.
As to the increased demand, Mr. Murphy said the Nader groups were confusing deliveries with demand. Deliveries are up 9 percent, but that reflects dealers' stocking up and does not relate to consumption, he said.