In recent years, home heating oil prices in the Capital District operated like a seesaw with the cost of filling a tank increasing as winter temperatures fell, and then consumers getting a break as the thermometer climbed.
The prices of other fuels like gasoline did just the opposite, as good summer weather meant a strong driving season that pushed up demand for gas and prices along with it.
All that changed last year when Hurricane Katrina hit the energy market like a lightning bolt out of the blue, decimating much of the nation’s refining capacity in late August and leaving local consumers with energy bills that took an extra large bite out of their wallets.
Now, a full 14 months later, consumers are left trying to wend their way through an unsettled market that’s being affected by everything from the war in Iraq to the nearness of national elections, according to Greg Mihailovich, director of New York Public Interest Research Group’s Fuel Buyers Group.
The changing market dynamics meant that the usual drop in oil prices after the Labor Day holiday didn’t materialize this year, and it may have contributed to local consumers holding off on oil deliveries last month.
Business has been good but we usually get a lot of orders from people who are topping off their tanks in August and September with 700 or 800 gallon deliveries before the season starts and we didn’t get as many this year, said Judy Miller, the business manager with Delmar-area Helderberg Oil. `We’ve been in business for 10 years now and it seems like customers may be changing their buying habits after everything that happened with Katrina.`
In mid-October, customers who held off may have benefited from a more than 20 percent drop in world oil prices. That temporarily pushed the cost for a barrel of crude oil below $58 on world markets and led to lower prices at area gas stations. But it came too early in the season for a major impact on heating oil and on Friday the good news appeared to be ending when the New York futures market closed with that same barrel of oil going for $60.75.
`Looking at the winter heating season this year, it’s really a head-scratcher because it is so unclear which way prices are going to go,` Mihailovich said.
`We used to have a dip in prices once we made it past Labor Day and the driving season ended, but a drop like this in October is very unusual. I’m sure it’s not completely unrelated to the political campaigns because we’re coming up on Election Day, but it still leaves things quite unpredictable.
`Oil isn’t really a simple supply and demand commodity anymore,` said Mihailovich. `Prices are largely being driven by speculators who are reacting to world events and trying to anticipate what the next trend is going to be. They are not bidding prices up based on what it cost them to buy the oil they have, but what it will cost to buy the oil they are going to get in the future.`
Customers who locked in prices during the summer have the advantage of avoiding the wild price fluctuations that have plagued consumers in previous winters. But many decided not to sign up because world oil prices were then near their highest levels in history and it didn’t look like such a bargain.
The seasonal dynamic in world markets has made it tougher for local dealers to offer long-term contracts which lock-in prices for an entire season. `We are a strictly cash on delivery company,` said Helderberg’s Miller of his small, family-run firm. `We don’t want to be responsible for managing a customer’s family budget. They can do that better for themselves. We just give them the best deal we can whenever they need oil.
`Right now we are at $2.32 a gallon, but that could change any day,` Miller added.
SIDEBAR: What people are saying — Politics, profits prevail
– By JIM FRANCO
Our reporter caught up with consumers at the gas pump this weekend, and asked what they thought about the cost of gas.
Through most of the summer, the cost of a gallon of regular unleaded gas hovered around $3, and while prices have since come down on average 25 percent, some consumers remain skeptical of why and what will happen after Election Day.
A September Gallup poll found that 42 percent of Americans believe the Bush administration is manipulating the prices to help Republicans get through what most predict to be a tough mid-term election, where Democrats are poised to take over the House.
Locally, many consumers said they feel the same way, but have mixed opinions about the relationship between politics and gas prices.
`I think they (prices) are going down because of the election,` said Bernard Smith as he was filling up at the Stewart’s on Delaware Avenue in Delmar. `I do think they will go back up (after the election), but they will go up slowly.`
`You watch. The day after the election they will start going back up,` said his wife, Carol.
While industry analysts scoff at the idea that politics plays a role in gas prices — saying that the speculative nature of the business and extraneous variables like Hurricane Katrina and increased demand in foreign countries are what have an impact on the supply of crude oil and drive the price at the pump ` randomly sampled consumers believe that oil companies are making record profits.
`Why did Exxon Mobile make $10 billion in profit in one quarter alone?` said Paul Kot, a principal at Loudon Locksmith, who was filling up at a Mobil station on Route 7 in Latham. `It does not seem right. It is almost like a monopoly because everyone needs fuel, and where else are you going to go?`
Kot said he too thinks prices will head back up after the Nov. 7 election, and that politics plays a role in why they are on a downward trend.
`It is too much of a coincidence,` he said of the timing. `I hope they surprise me, but I do think they will start to go back up. It is just too coincidental.`
Like Kot, Christine Hurlbert, of Ballston Spa, said she thinks the government should step in and impose regulations on big oil companies in an effort to control gas prices because it is a commodity everyone needs and because of that, the companies are exploiting consumers.
`Everybody needs it, and it should be socialized. The prices should be controlled in some way,` she said. `I don’t buy the whole supply-and-demand thing, and I don’t buy the reasons they (oil companies) give for the prices going up.`
She said she thinks oil companies are driving prices down before the mid-term elections so they will keep the status quo in Washington, rather than Washington putting pressure on the oil companies.
The Democrats’ talking points headed into the election include taxing windfall oil profits and investigating a possible collusion between a handful of oil companies to control supply and drive prices up. Republicans say more needs to be done to decrease our reliance on foreign oil, including an expansion of domestic drilling.
Many think the high gas prices will help foster alternatives, and both Democrats and Republicans say a long-term solution includes doing more to promote alternative sources of energy like solar, hydro, fuel cells and hybrid vehicles.
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