Connecticut homeowners are reeling this spring as oil prices spike at the end of the heating season, tracking rising global demand and markets upended by Russia’s invasion of Ukraine.
Energy prices are climbing on all fronts — at the gas pump and for natural gas used to heat homes and businesses — contributing significantly to the highest inflation in 40 years.
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John Stimpson of Marlborough said he paid $2.67 a gallon in a contract he signed with his oil dealer in April 2021. When the one-year program ended last month, he topped off his tank with the purchase of 17 gallons at $6.20 a gallon, he said.
“I hate the price, but I don’t think he’s ripping me off,” Stimpson said, referring to his dealer.
Worried about how much he’ll pay for oil in the coming months, he said he will not sign another one-year contract.
“I’ll take a chance in the fall,” Stimpson said.
Residential heating oil in New England sold at about $5.13 a gallon in late March, more than double the $2.32 it sold for a year ago, according to the U.S. Department of Energy.
The war in Europe is weighing on oil prices. The European Commission on Wednesday proposed a full ban on Russian crude and oil product imports by the end of the year. The action sent oil prices rallying by more than 4% in early trading.
The approach of summer may bring some price relief. Christian A. Herb, president of the Connecticut Energy Marketers Association, which represents oil dealers, said futures prices — what’s being paid in contracts to buy oil in the coming months — are declining.
He attributed the lower future prices to “backwardation,” which describes a higher priced asset than prices trading in the futures market due to a greater demand now than contracts in the near future. The end of the heating season and fears of a recession looming are contributing to a drop in oil prices, he said. Prices are predicted to decline in June, July, August and September, Herb said.
With oil prices dropping, most oil dealers that are members of the trade group are not drawing up contracts with customers, he said.
Kate Childs, co-owner of Tuxis Ohrs, a family-owned Meriden business, said she can lock in a future price, but has no idea if the price in January will be competitive. Connecticut law requires dealers to secure pre-paid oil contracts with supplies already purchased.
“I’m not allowed to play the market and hope it goes down,” she said.
Prices on all types of fuel have been climbing. Gov. Ned Lamont and the General Assembly suspended until Dec. 1 Connecticut’s excise tax on gasoline by 25 cents a gallon as prices at the pump surge to $4 a gallon. And natural gas prices have been on the rise for months.
Heating oil prices have been the most volatile in memory, Childs said. Prices have jumped by 50 cents or 60 cents a gallon in just hours, between the time a customer called with an order and when the oil was delivered, she said.
Oil would jump $1.50 a gallon in a week when oil dealers previously “wouldn’t see 1.50 in a year,” Childs said. She compared her business with gas stations that also are grappling with rapidly rising prices.
“You take the up days and down days and hope you end up in the middle,” she said.
Heating oil prices are being pulled by rising diesel fuel and global demand, Childs said. She also cited rising global demand and “fears of what’s happening in Europe.”
“We were in a slow rise throughout winter, she said. In the last few months we’ve seen spikes,” she said.
With oil embargoes in the 1970s and demand that dropped suddenly at the start of the pandemic, bad times are not rare occurrences for home heating oil dealers.
“We’ve made it through before and we’re pretty confident we’ll survive,” Childs said.
Stephen Singer can be reached at firstname.lastname@example.org.
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