Heating oil prices fall as natural gas prices start to rise
Ken Williams likes what he’s seeing.
Over the past five years, the president of Scott-Williams Inc., a Quincy heating oil dealer, has watched many longtime customers switch to natural gas to keep their homes warm, as gas prices steadily fell and oil prices remained stubbornly high.
This year, the opposite is happening: Natural gas prices are rising in the region, while home heating-oil prices have plunged to their lowest levels in four years.
“It’s most welcome,” said Williams, whose company delivers heating oil to about 4,000 South Shore households. “This is going to help us immeasurably.”
It’s also going to help residents who still rely on heating oil. Its average price in Massachusetts this week, $3.33 a gallon, is more than 50 cents less than a year ago, according to the state Department of Energy Resources. That translates into savings of more than $100 when a homeowner fills a 275-gallon tank, officials said.
Another good sign for heating oil users: Industry reserves are up. Late November inventories in New England rose to 3 million gallons, up from 2 million at this time last year. Those additional supplies could help avert spot shortages this winter, further stabilizing prices, industry officials agree.
“Things are looking quite good,” said Michael Ferrante, president of the Massachusetts Energy Marketers Association, which represents heating oil dealers. “We’re pretty well positioned heading into the winter.”
The drop in heating oil costs follows the plunge in crude oil prices, the result of a surge in US production and a slowing global economy that’s lowering demand. Crude has fallen below $74 a barrel from more than $100 in June. Gasoline prices also have plunged, down to an average $2.87 a gallon this week from $3.70 in June.
It remains significantly cheaper — about 40 percent less — to heat a home with natural gas, but natural gas prices are on the rise. Northeast Utilities, the owner of NStar, recently said winter rates for Nstar’s 300,000 natural gas customers will increase by 16 percent this winter, to about $171 a month per average household. The increase is driven largely by pipeline constraints that are limiting the flow of natural gas into New England, utility officials say. Since regional demand for gas is outstripping supplies, prices are rising.
In addition, NStar’s 1 million electricity customers are getting hit with a nearly 30 percent jump in prices this winter, tied to the rising cost of natural gas used by power plant owners to generate electricity. The 1.3 million customers who buy electricity from National Grid will pay be paying 37 percent more this winter. (National Grid’s residential gas rates will decline slightly because of a one-time credit.)
Mark Zandi, chief economist at Moody’s Analytics, a forecasting firm in West Chester, Pa., said the national and Massachusetts economies are big beneficiaries of falling petroleum prices.
“The plunging gasoline prices are particularly potent — almost like a giant tax cut that puts more money in people’s pockets,” he said.
Alan Helfgott, the owner of a three-bedroom home in Boylston, said the recent fall in prices means he’ll save more than $300 this winter on heating oil delivered by Noar’s Oil of Worcester. Prices are 50 cents below last year’s levels.
“We’ll take any relief we can get in the price of oil or gas,” said Helfgott, a regional sales manager for a bank. “It gives me a little bit more disposable income. It may mean going out to the movies and restaurants a little more, or maybe buying a TV. A lot of good things can come with that extra money.”
Some economists question how much further prices can fall. The recent plunge in crude oil prices, to about $74 a barrel, is close to the break-even point for many US oil producers, who could start losing money if their expenses exceed the prices they’re getting.
David DuFault, a sales manager at Noar’s Oil, said he’s just relieved that heating oil prices have fallen and natural gas’s cost advantage has narrowed, making his product more competitive.
“We’re very, very happy for our customers,” he said. “This is wonderful news. If prices stay down, it’s going to be great for everyone involved.”