They're Reeling From A 'Brutally Warm' Winter "December, January And February Are Meat-and-potato Time,\\" Says An Oil Dealer. \\"it's Got To Be Cold."

Posted: October 20, 1991

Fuel dealer Gene Waldman likes to divide the heating-oil season between gravy and meat and potatoes.

The early and late months of the season are gravy months, with mild, unappetizing weather and lukewarm sales. The middle months are meat-and- potatoes months, with generous helpings of cold weather and hearty sales.

At least they're supposed to be.

Last winter amounted to one big plate of gravy, says Waldman, co-owner of Stott Waldman Oil Co., of Philadelphia. The winter before was only slightly better.

This winter, Waldman and other area heating-oil distributors are hankering for a meat-and-potatoes diet.

"December, January and February are meat-and-potato time," Waldman says. ''It's got to be cold. We need it."

December was the only meat-and-potatoes month the industry enjoyed last winter. The rest of the season was "brutally warm," Waldman recalls, and homeowners used less heating oil.

Prices also surged in tandem with crude-oil prices because of the turmoil in the Middle East and worries about possible supply shortages, prompting some residents to conserve fuel.

The result was that many oil distributors had problems making ends meet, Waldman said.

Early predictions for this heating season are not much better for the industry. The outlook for consumers is more optimistic, however. With inventories of heating oil above the average of recent years, prices this season are expected to be lower than those last year.

The Department of Energy's Energy Information Administration, in its preliminary Winter Fuels Report, forecasts above-normal temperatures from October through December and predicts there will be an abundance of fuel oil to keep homes warm and cozy through March.

If so, the report says, homeowners could pay far lower prices for heating oil this winter than last: an average $1.04 a gallon, compared with $1.17 a gallon last heating-oil season.

Prices in New Jersey and Pennsylvania are well below the predicted levels as the season opens this month, and substantially lower than prices at this same time last year.

In Pennsylvania, a gallon of heating oil averaged 90.1 cents last week and in New Jersey, 96.5 cents. Last year at this same time, heating oil cost an

average $1.263 a gallon in Pennsylvania and $1.166 in New Jersey.

George Dawson, spokesman for New Jersey's Department of Environmental Protection and Energy, says sluggish demand has raised the level of inventories and helped push prices lower.

Inventories held in refinery storage tanks and oil terminals totaled 137.3 million barrels for the week ended Oct. 11, compared with 135.9 million barrels a year ago, according to the American Petroleum Institute.

"Even if the weather is much colder than last year and there is a sharp increase in demand, there will be adequate supplies of heating oil in the United States for the coming winter," said Edward H. Murphy, API's director of finance.

Nevertheless, concern that a decline in Soviet oil production could divert imports of heating oil away from the United States to Eastern Europe and other regions normally supplied by the Soviet Union pushed the price of crude oil to $24.14 a barrel on Friday, its highest level since January.

But Murphy said that, even taking into account a decline in imports to the United States, there is enough heating oil to meet the demands of a "1-in-20 cold winter."

Fred Sacco, executive vice president of New Jersey's Fuel Merchants Association, a group of more than 400 home heating-oil distributors, is not concerned about supplies. He hopes for a winter colder than the last two.

"I'm sure the consumer would not like to hear me say this," Sacco said.

A cold winter is needed to help stem the overall decline in the industry, Sacco says. The market for heating oil has shrunk by more than a third in the last decade as homeowners purchased more efficient equipment, Sacco said.

"It's not uncommon for someone to change their consumption by 50 percent by putting in a new boiler or furnace," he said.

To help cut their losses, many distributors are resorting to new strategies for buying and selling heating oil. Traditionally, smaller distributors such as Waldman bought fuel on the spot market as customers needed it, holding very little in storage.

Now they are buying more of their product on the futures markets in an attempt to lock in lower prices and steady supplies months in advance. And to ensure that they get a certain volume of sales and don't get stuck with a lot of excess fuel at the end of a long, warm winter, they are contracting with homeowners to buy a certain amount of oil at set prices in advance of the season, Sacco said.

For now, the industry is in a gravy month. Most customers in Waldman's service territory around Philadelphia, Bucks, Delaware and Montgomery Counties already have filled their tanks. Until the hoped-for freezing temperatures arrive, distributors are busy cleaning furnaces and doing routine maintenance, waiting for the cold weather to come.

"We should start getting serious weather in the middle of November," Waldman said. "By Thanksgiving, winter should be here. If not, there's always tomorrow."

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