With Oil Prices On The Rise, Winter May Be Expensive

Summer isn’t the usual time to ponder home heating bills, but with the price of oil continuing to break new
records, now may be the best time to think about how you’re going to pay for higher heating costs this winter.

The average cost of a gallon of fuel oil this season is expected to run about $1.65, compared to $1.35 last
year, according to the Independent Connecticut Petroleum Association.

Crude oil has soared more than 40 percent this year, and industry experts attribute the rise in prices to a host
of factors, ranging from escalating worldwide demand to a continuing U.S. economic expansion and fears
about terrorism and the war in Iraq. In addition, some have said that investment speculators have also helped
boost the price. The bottom line is that as oil prices march higher, so will your costs for gasoline, diesel fuel
and home heating oil.

“The number one factor affecting the price is the cost of crude oil,” said Ron Planting, an oil analyst with the
American Petroleum Institute in Washington, D.C. “Last September, oil was going for about $28 a barrel. Last
week, it hit $49 a barrel. And since we import about 60 percent of what we use, what happens on the world oil
markets has a big influence on what we experience here.”

The record high price this year for a barrel of crude oil (which holds about 42 gallons) is $49.40, the highest
price in more than 20 years of oil futures trading on the New York Mercantile Exchange. Oil prices this week
did ease a bit from last week’s highs, declining for the third straight day to below $46 a barrel as Iraq boosted
its flow of oil to world markets.

Economists have warned that if oil prices don’t ease from their historic highs, the national recovery could be in
jeopardy as spiraling energy costs begin to raise costs and erode profits for businesses large and small and
rob consumers of their discretionary income. Several investment firms have forecast that oil prices will stabilize
this year around $40 a barrel.

In the meantime, industry experts are encouraging consumers to consider energy conservation steps, such as
added insulation, weather stripping and energy-saving windows, and to consider setting up special budget
plans or pre-payment plans with their local fuel oil providers, which typically lock in a price at the beginning of
the season before prices escalate further.

Rising oil prices are also worrying municipalities and social service agencies in the region that help those of
limited income pay for home heating oil.

“When fuel costs rise, people have a difficult time,” said Ann Grabow-ski, a program manager with Catholic
Charities and Family Services, which serves the diocese of Norwich. “This will have a very large impact on the
clients that we serve. They will apply their money to pay the rent first and put food on the table, and they
sometimes let the utilities (and oil bills) slide, and then they’re left with very large bills.”

Naomi McClure, a senior social worker with the town of Groton’s social services department, said there are a
number of programs available locally to help those in need, including senior citizens, but the funds aren’t

“I don’t know what we’re going to do with oil prices rising. We’ll just have to wait and see,” McClure said. “I’ll
use everything I possibly can” to help the needy, she said, including municipal programs, regional social
service programs provided through groups like the United Way and the Thames Valley Council for Community
Action and utility-sponsored programs such as the statewide Operation Fuel, which dispensed $842,000 over
the past two years to more than 12,000 needy individuals. McClure estimated that her municipal agency helps
several hundred each year with some form of heating assistance.

U.S. Sen. Christopher J. Dodd, D-Conn., said the Senate this past year passed a bipartisan energy bill
designed to help consumers by increasing production and the development of new sources of energy,
including solar, wind and geothermal technologies, but the legislation has been blocked by opponents. “We
hope that the president and his allies in Congress will think again about this issue and decide to support the
legislation the majority of us supported last year,” he said.

Dodd said Congress should also ensure that the Low Income Home Energy Assistance Program, a federally
funded program that helps eligible low-income households meet their home heating needs, is fully funded this
year in light of predictions of escalating fuel bills.

The Independent Connecticut Petroleum Association, which represents more than 425 gasoline and heating oil
dealers, said in its annual fall energy outlook that consumers should be prepared for “what shapes up to be a
more expensive heating season than last year.”

“We see energy prices rising across the board in the electricity, natural gas and oil sectors due to political
factors relating directly to fear created by activities in the Middle East and Iraq,” the petroleum association said in its annual energy report.

The trade group also said the recent spike in prices shouldn’t be attributed to problems with supplies. “In fact,
heating oil inventories and natural gas inventories are well within normal ranges given the time of year,” it said.
“We will have an ample supply of heating fuels as we go into the coming winter heating season.”

While experts agree that supply isn’t a problem, at least not now, they do point the finger at growing demand.
This year’s unabated rise in oil prices is attributable to the growing global thirst for oil  to do everything from
power automobiles to energize booming factories. Most of the global growth, in fact, is occurring in Asia, where
countries like China are burgeoning as oil-consuming factories churn out a wealth of products and cash-rich consumers there buy automobiles en masse.

And because we live in a global economy, that worldwide demand ratchets up prices here in eastern Connecticut, where consumers have already become resigned to gasoline around $2 a gallon.

Even though it’s still August, some in the fuel-oil industry are counseling consumers to consider pre-paying for
their heating oil this year, or at least signing up for a budget plan that allows the consumer to pay a set price for oil that is spread over 12 months, avoiding paying large bills during the heaviest months of use.

The pre-payment option, while requiring more money up front, calls for consumers to pre-pay at a set price for
their oil use for the season. Those prices typically are cheaper than if the consumer pays on a monthly basis or
if they pay each time they fill up their oil tank.

Mark Mazzella of the family-owned Benvenuti Oil Co. in Waterford said homeowners should consider such
options this year because of the rising cost of fuel oil. He said the 54-year-old fuel oil company has been
offering a pre-paid plan for about a decade and it’s proving popular with some of its customers, especially this
season as prices continue to escalate.

“Some of our customers say, ‘What if the price drops during the season?’ but that hasn’t happened yet,”
Mazzella said.

The heating oil dealer said that his customers no longer point the blame on the local fuel providers. “They
understand,” he said, adding that the rising prices also affect how much he pays for oil for his fleet of five
trucks, which each carry about 2,500 gallons of fuel.

Mazzella said that last year at this time, a gallon of home heating oil cost about $1.29. Today, that same gallon
can go for as much as $1.65 locally. “And if gas is going up, you can bet that home heating is going up,” he
said, since both come from the same fuel source.

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