Connecticut households are heading into winter facing heating oil prices above $6 a gallon, roughly $2.78 more than at the same time last year, according to Chris Herb, president and CEO of the Connecticut Energy Marketers Association.
Herb said the surge is putting pressure on families and the small, often family-owned fuel distributors that supply them. Unlike some previous price spikes, he said the current increases reflect not only financial market swings but also growing concerns about the physical supply of fuel worldwide.
Fuel costs squeeze families and local businesses
Herb said heating oil dealers must pay for fuel before delivering it to customers, putting pressure on their credit lines as prices climb. Some customers are also taking longer to pay their bills or using credit cards, adding fees that dealers must absorb.
High diesel prices are compounding the problem. Herb said diesel, which is chemically almost identical to heating oil, is approaching $7 a gallon. Herb said the two fuels face many of the same market pressures, and that diesel costs also affect the cost to transport food, prescription drugs and other consumer products.
“There's no cheap way of avoiding nearly $7 diesel,” Herb said.
To help customers manage heating costs, some dealers offer budget programs that spread payments evenly over several months. Herb also recommended having heating systems tuned up and taking steps to conserve fuel.
He encouraged households that may struggle to afford deliveries to explore assistance programs, including the Connecticut Energy Assistance Program and Generation Power CT.
Supply pressures are adding to price increases
Herb said the current market differs from previous price spikes, which he described as largely driven by stock market trading and often short-lived.
“Typically, when we see these price spikes, they are Wall Street market-driven spikes,” Herb said. “That recovers pretty quickly, and what's happening this time is that we actually do have a physical supply issue globally that is starting to pop up in the United States.”
He pointed to increased seasonal demand for diesel during the fall harvest and for heating oil as colder weather arrives. He also cited damage to refineries in the Persian Gulf, Russian restrictions on diesel exports and uncertainty surrounding oil shipments through the Strait of Hormuz.
The federal government has released some oil from the heating oil reserve, Herb said, while Europe has also released diesel reserves. He described recent developments as providing some relief, but cautioned that they do not offer a long-term solution.
Herb said he is particularly concerned about whether fuel suppliers could meet demand if an extreme cold snap forced electric power generators to rely heavily on oil and diesel when natural gas supplies were insufficient.
He said the industry has historically met those demands, leaving him cautiously optimistic, but warned that doing so could be difficult this winter.
Gasoline prices may not follow crude oil
The unusual market conditions are also complicating the relationship between crude oil prices and gasoline prices at the pump.
Herb said crude oil and gasoline prices traditionally move together, with gasoline prices following changes in crude. But that relationship has become less reliable as suppliers respond more directly to the amount of fuel available.
“The markets aren't functioning the way they typically do,” Herb said. “Wall Street and the local suppliers are much more closely following actual supply.”
When supply increases, prices can fall even if crude oil prices are rising, he said. When supplies tighten, prices can rise. That means crude oil prices alone may not reliably predict what Connecticut drivers will pay at the pump.
State aid may not cover the full need
Connecticut has recently committed $12 million in additional energy assistance funding. Herb welcomed the money, but said more will be needed to help households facing substantially higher heating bills.
“With heating oil prices doubled, every dollar is needed, every dollar counts and every dollar is appreciated,” he said.
But he added that the funding does not go far enough to meet the need.
Herb said he hopes additional federal assistance will follow, as families and fuel providers prepare for the colder months.
