There’s some good news for those thinking melancholy thoughts about the end of summer and what inevitably follows. Heating oil prices have plunged to their lowest levels in six years, and consumers are likely to see hundreds of dollars in savings this winter on their heating bills.
Heating oil in Massachusetts tumbled to an average price of $2.49 a gallon in late August, down more than 30 percent from the same period a year earlier and selling in some parts of the state at less than $2 a gallon, according to the state Department of Energy Resources. If the current price patterns hold — and many analysts think they will, given the glut of crude oil on global markets — a typical household using 800 gallons of oil during a winter could save nearly $1,000.
Alan Clayton-Matthews, a Northeastern University economist, said the drop in heating oil prices may provide a small boost to the state’s economy — assuming prices hold through the winter — as people spend more on products and services.
“For most households, 800 to a thousand bucks is a big deal,” he said. “It will free up money for households to spend on other things.”
Jim Phaneuf, who lives and runs an insurance agency in Belchertown in Western Massachusetts, said oil heat is the only option at his home and business. If prices remain low through the winter, he said, he could save hundreds of dollars at his home and as much as $2,000 at his business.
“Any time prices on anything go down, like fuel oil, it’s good,” Phaneuf said.
Petroleum prices are falling because of record US oil production and weakening global demand, the result of slowing economic growth in other countries, particularly China. The price of gasoline in Massachusetts averaged $2.23 a gallon Monday, down $1.20 from a year ago, according to AAA Northeast, a nonprofit auto services organization.
Average heating oil prices are down over $1 from last August’s $3.68 gallon. It’s the lowest summer’s end price since 2009, near the depths of the recession, according to the Department of Energy Resources.
For low-income families, the decline in heating oil prices could take some pressure off tight household budgets, offsetting rising rents and electric bills, said John Drew, president of Action for Boston Community Development, or ABCD, a nonprofit antipoverty agency that provides heating assistance in the Boston area. More than 180,000 households in Massachusetts qualify for federal heating assistance, and lower fuel oil prices mean their grants would buy more, Drew said.
“It helps offset all the other costs in their lives,” he said. “That’s the one dividend they have, that oil hasn’t gone up.”
The decline is welcomed by heating oil suppliers, who in recent years have lost thousands of customers switching to natural gas because of lower costs. Even with those conversions, about one-third of Massachusetts homes heat with fuel oil, according to the US Census.
“It’s been fantastic,” said Ted Noonan, owner and president of Springfield-based Noonan Energy Corp., provider of heating oil to about 10,000 in Western Massachusetts and 2,500 on Cape Cod. “Our customers are really happy. You don’t have as many people thinking of converting to natural gas.”
Until a year ago, prices for heating oil were roughly twice as high as for natural gas, but the gap has narrowed. Heating oil runs about 50 percent more than natural gas, according to industry data.
Natural gas prices, which fell sharply in recent years, have resumed their slide because of the surge in natural gas drilling across the country. But recent price declines haven’t been as dramatic as those for heating oil. Natural gas wholesale prices have been bouncing between $3 and $4 per million British Thermal Units over the past year, only recently falling slightly below $3 per million BTUs.
Eversource Energy and National Grid, the state’s two largest natural-gas utilities, with a combined 1.2 million gas customers, are expected in coming weeks to file winter rates that go into effect in November and run through early spring.
Michael Durand, a spokesman for Eversource, said winter rates this coming season will probably be similar to last year’s, about $170 a month to heat an average home during winter. But he noted that Eversource cut rates during the middle of last winter, to the equivalent of $151 per month, because of falling wholesale natural gas prices. He said the same scenario could unfold this winter.
National Grid’s natural gas customers saw similar pricing as last winter. The utility declined to predict winter rates, but noted in a statement that natural gas prices have been “moderating or headed downward.”
Michael Ferrante, president of the Massachusetts Energy Marketers Association, which represents hundreds of heating oil suppliers, said members are confident prices will remain relatively low this winter. He noted inventories of heating oil, purchased at recent low prices, are now 21 percent higher than they were a year ago, providing a financial buffer should wholesale fuel prices unexpectedly shoot upward this winter.