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War, Weather Could Hit Heating Oil Users Even Harder

December 4, 1990

NEW YORK (AP) _ The fear of war pushed up the price of home heating oil, but a warmish fall has helped people avoid using too much of it.

Consumer advocates now fear that energy bills could be sent even higher with the arrival of winter weather, although the uncertainties of the Persian Gulf standoff throw a wild card into the equation.

″If we begin to get into cold weather and supplies start to be drawn down, we’re very concerned prices could go even higher and bust people’s energy budget,″ said Richard Kessel, executive director of the New York State Consumer Protection Board.

Northeastern heating oil dealers agree that a cold snap could push prices up. But they see war or peace in the Middle East as having a potentially greater impact, because supplies are running well ahead of last year’s levels.

Dealers blame the prices, which in some cases have gone up about four times as much as they might during most cold seasons, on war fears that have mesmerized the market for months. But they say a diplomatic solution for getting Iraq out of Kuwait could send prices falling as sharply as they rose.

If peace breaks out, ″the price of this stuff is going to fall through the floor,″ said Eugene Guilford, of the Maine Oil Dealers Association.

Recent industry statistics showed the nation’s stockpile of heating oil to be about 15 million barrels higher than it was going into December of 1989, largely because many in the industry stocked up ahead of time to avoid a repeat of the run on supplies during last December’s extreme cold snap.

The ample supply and the lack of cold weather has Kessel and others thinking that consumers are unfairly being charged too much, but it’s not easy to pinpoint a culprit.

″Whether it’s purposeful or whether it’s a product of the system, I think the market is anti-competitive,″ Kessel said.

Consumer advocates say an average family that uses heating oil can expect to pay $300 to $500 more to keep warm this cold season, assuming prices stay about the same.

The higher prices are also bad news for retail heating oil dealers, who say they are getting squeezed by the Gulf crisis.

″We kind of got hit with a double whammy,″ said Vera Haskins, executive vice president of Mauger & Co., in Malvern, Pa. ″We got hit with this warm weather, and on top of this, we lost about 20 to 25 percent of our margin coming.″

Mauger, which supplies fuel in the Philadelphia area, was forced to lay off five people from its payroll of about 145, she said.

″We kept saying it’s going to get cold, it’s going to get cold, but it didn’t,″ Haskins said. Dealers are still hoping for cold weather, although Haskins emphasizes most of them would prefer normal, seasonal cold instead of record cold.

Heating oil dealers would rather make their money on lower-priced oil, both because they would have less cash invested in their inventories and also because fewer people will look to alternatives, such as natural gas, when heating oil is cheap.

″The fact that we’re no longer as competitive is a killer in our industry,″ Haskins said.

Each $10 rise in the price of crude oil pushes heating oil up by about 25 cents, said Bob Greenes, of the New York Oil Heat Association. In some Northeastern markets, the price has gone up as much as 39 cents a gallon this season to more than $1.40 a gallon.

Greenes said he’s convinced the price will plummet as soon as the Gulf crisis runs its course.

″If there were a peaceful solution, I think the price of oil would start coming down substantially,″ he said. ″There would be a lag, because everybody has been stocking up on higher-priced oil. If there were a war, I don’t think the price would change much because I don’t think hosiltiies would last that long.″

1613EST

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