Homeowners feel the heat of higher fuel oil prices

Rising crude oil prices and supply issues are squeezing more than just motorists paying higher and higher prices for gasoline at the pump.

Skyrocketing heating oil prices are also pinching some at home, with winter just around the corner.

The U.S. residential heating oil price jumped almost 16 cents in the last week to a record $3.11 a gallon, according to data released Wednesday by the U.S. Energy Information Administration. The national heating oil price is up 74 cents from the same time a year ago.

Orchard Oil in Grand Forks was selling No. 2 heating oil, the most common heating oil used locally for indoor heating in the winter, for $3.16 a gallon Thursday. The price of No. 1 heating oil, generally used for outdoor heating, is usually 30-40 cents more a gallon at Orchard Oil.

Roger Orchard said his heating oil prices have surged about a dollar a gallon in the past year.

"The whole thing is just out of control," he said. "It's a burden on everybody. It's a burden on us as suppliers and the end user who has to pay more. We just hope that everything gets better. Prices will go down, but I don't know when that will be."

Bob Hjeldness, general manager of Cenex Farmers Union Co-Op Oil, Oslo, Minn., and Argyle, Minn., said his current prices of $3.09 per gallon for No. 2 heating oil and $3.24 per gallon for No. 1 heating oil are up about 80 cents from last year at this time.

Hjeldness said an average monthly heating oil fill of 150 to 200 gallons costs customers $450 to $600, as much as $150 more than it did a year ago.

"It's going to be darn tough on some people," he said of the increased heating costs. "For a lot of people on fixed incomes, it's going to be tough making ends meet."

Many in Grand Forks and East Grand Forks switched to natural gas or other heat sources after their older heating oil furnaces were destroyed in the Flood of 1997. But many in older houses in rural communities in North Dakota and Minnesota still use heating oil to heat their homes in the winter.

Orchard blamed the high price of heating oil, which is more expensive than propane and natural gas, on high crude oil prices, supply difficulties securing product produced by refineries and money market and other funds buying up oil futures, inflating prices.

Hjeldness said current prices are as much as 30 to 50 cents overpriced, as a result of traders artificially jacking up oil prices.

"Traders drive our market," he said.

Supply shortages of heating oil also have led to increased transportation costs and higher prices.

Hjeldness said he has been unable to get heating oil out of the Magellan Pipeline Co.'s Grand Forks terminal pipeline for months as a result of refining and supply issues. He said because of supply shortages, he has been forced to pay 16 cents a gallon to ship heating oil from Roseville, Minn. - almost 14 cents a gallon more than he usually pays to haul it from Grand Forks.

Those increased costs are passed on to consumers, many of whom are older and living on fixed incomes.

"Our hands are tied," said David Segerholm, owner and manager of Skip's Petroleum & Propane Co., Northwood, N.D., and Baseview Petroleum Inc., Emerado, N.D.

Heating oil is produced by refineries along with diesel fuel as a distillate fuel oil.

Generally about 60 percent of heating oil prices are based on crude oil prices - which are hovering near $100 a barrel - with the rest typically split evenly between refining and distribution/marketing costs. Retail heating oil prices are generally 50 cents or more a gallon higher than wholesale prices.

Less than 10 percent of American households use heating oil as their main heat source and most of them are in the northeast, according to the U.S. Energy Information Administration.

Dennis Jensen, co-owner of D&D Heating & Sheet Metal Inc., Manvel, N.D., said his company switched out about 500 furnaces in the Grand Forks area a decade ago after the flood. Only two of the replacements were fuel oil furnaces. The rest were natural gas, propane and a few electric, he said.

Jensen said of the smaller towns his business services, as many as half have fuel oil furnaces.

He said about 90 percent of sales are for natural gas or propane and when heating oil furnaces break down, they are usually replaced with natural gas.

Jensen was unsure if high heating oil prices might lead some to switch to other heating sources, such as geothermal or corn-burning. But he said geothermal heating is expensive to install, and high corn prices make it more expensive to burn corn.

John Northagen, owner of Cornbusters ND, Thompson, N.D., which sells corn-burning stoves, furnaces and boilers, said he has heard customers complain about the cost of heating oil.

But Northagen said most who buy corn-burning heat sources still use traditional heating options as supplements.

"When it gets cold enough that they can't keep up, they use oil or propane," he said.

Schuster reports on business. Reach him by phone at (701) 780-1107 or (800) 477-6572, ext. 107; by e-mail at rschuster@gfherald.com or view his business blog at www.areavoices.com/bizbuzz .