As the U.S. and Israel’s conflict with Iran rattles global energy markets, Connecticut heating fuel providers say the turbulence is already being felt across the state’s energy supply chain.
“This is very intense,” said Chris Herb, president and CEO of the Connecticut Energy Marketers Association, which represents fuel oil dealers and gasoline distributors across the state.
“When you're getting 30, 40 calls [from CT energy suppliers] … and then, I can't even count the emails.”
Connecticut is among the states most exposed to heating oil price volatility. Roughly one-third of households rely on heating oil for home heating, placing the state fourth in the nation for dependence on the fuel.
The wholesale fuel market began moving within hours of the first military strikes, Herb said.
Wholesale prices jump within days
“The bombing started on Saturday. The wholesale markets responded immediately, increasing by 25 cents per gallon,” Herb said. “My members, who've been in this business for five decades or more, told me that they have never seen a price move on a Saturday of that extent in history.”
Price increases continued as markets opened in the days that followed.
“On Monday, the market opened up with another 15 cents a gallon increase,” Herb said. “And then, the first thing that happened when I woke up [Tuesday morning], there was a 40-cent increase.”
Those increases will likely show up quickly for consumers.
“Customers are going to start feeling that on their next home fuel delivery,” Herb said.
Gasoline prices may rise as well, though Herb said heating oil and diesel tend to react more sharply to supply disruptions.
“Heating oil and diesel are much more sensitive to these price increases because they're a little bit tighter in supply, where gasoline is in a very strong supply situation right now,” he said.
Dealers fielding questions from anxious customers
Family-owned heating oil dealers and gas station owners across the state are already feeling pressure from both suppliers and customers trying to understand what the war means for energy prices, Herb said.
“The family-owned heating oil dealers and gasoline station owners we represent are right at the tail end of all of this price volatility before it gets to the customer,” Herb said. “We have to buy it first, so we are feeling every penny of pain right before it gets to our customers.”
Dealers are also fielding questions from residents concerned about what their next fuel bill could look like.
“They're getting dozens and dozens of calls from their customers wanting to know what's happening and what the ultimate cost is going to be on them,” Herb said.
CT shortages not immediately expected
Despite the sharp price swings, Herb said Connecticut is unlikely to face fuel shortages in the near term.
“At this time, especially because of where we get our fuel — we're getting it mostly from North America — I don't have any concerns,” Herb said.
Gasoline inventories remain strong, he said, while heating oil and diesel supplies are somewhat tighter.
Still, Herb urged consumers not to panic.
“As long as people are rational and don't overreact, then I think that we will be in a pretty good position in the short-to-medium term,” he said.
Natural gas pressures ripple across energy markets
Herb said the conflict is affecting more than just petroleum fuels. Natural gas prices are also climbing and recent cold weather already strained supplies in the region.
“We had actually a natural gas shortage just a couple of weeks ago where about 40% of all the electric generation in Connecticut switched from natural gas to heating oil and diesel fuel because there wasn't enough natural gas during that real, real harsh cold snap,” Herb said.
That shift increased demand for distillate fuels such as heating oil and diesel.
“So part of the reason why distillate inventories are a little bit on the lower side is because oil was the sort of fuel of last resort to keep the lights on,” he said.
State options limited as global markets drive prices
Herb said Connecticut leaders could consider steps similar to those taken during the early months of the Russia-Ukraine war, when lawmakers temporarily suspended the state gasoline tax.
“They suspended the gasoline tax,” Herb said. “In addition to taxes, the heating oil reserve does reside in part in Connecticut — that added supply could be a very important tool just to ensure that people do have fuel.”
Even so, Herb said local policymakers have limited influence over energy markets shaped by global events.
“Largely, we're sort of at the whim of this global market, and we're at the whim of where the war takes us,” he said.
