Written on: May 19, 2022
We know many of you are looking at the energy cost increases and wondering when this will end, and we don’t blame you. Our goal is to keep you in the loop as much as possible, even though the situation remains very fluid.
Last week, our suppliers again raised prices by over 65 cents per gallon over a few days. The reasons are complicated and seem to be affecting heating oil and diesel fuel much more than gasoline.
The driving factor is that both heating oil and diesel fuel–pretty much the same thing–are in abnormally short supply now. In fact, if you look at prices on the commodities exchanges, they show heating oil at a dollar less than we can get it at! That never happens. It’s called “basis blowout” and reflects a disconnect between the markets and actual supplies.
Our propane customers have been feeling the pain too, although price swings have not been as erratic as what we’re seeing right now with heating oil and diesel. Since propane is a by-product of both crude oil and natural gas, rising prices for these two fuels have a ripple effect on propane and drive its price upward.
Inflation has raised its ugly head too, as the actual cost of delivering fuel has risen. Long-time factors that have always influenced where propane prices go include supply-and-demand balance, transportation bottlenecks, energy policy and other issues.
The good news is that the supply issues are happening because the markets expect heating oil to go lower by a fair amount over the next several months. Fuel suppliers are reluctant to purchase fuel now and get stuck with higher-priced product. The bad news is that it is causing prices to be artificially higher now, and no one really knows for sure what will happen with the Ukraine war. The war is also causing a historic amount of diesel fuel to be shipped to Europe, which is impacting heating oil as well. By the way, we are seeing the same kind of surges in natural gas and electric costs.
We decided to hold off most deliveries except for those who seemed to be running low. It didn’t help that we’ve had an unusually cold spring, and people needed to use their heat longer than normal.
Beyond that, we want to urge people to get on our Budget Plan program, which allows us to spread your fuel payments over 10 months, beginning in September. If prices do stay high next year, it will be much easier to manage your bills if you don’t have to pay for all of your deliveries in just five months of fall and winter.
There is no way of knowing whether prices will rise or fall going forward. However, we will do our best to keep you in the loop as things emerge.
If you have any questions, don’t hesitate to call our office. We are here for you.
Shocking Spike in Fuel Prices
Unsurprisingly, we’ve been getting many calls around two connected issues: the surge in fuel prices and supply concerns. People are astounded by how much prices have risen and how fast. So are we. They are also concerned that there will be interruptions in supply that will cause them to run out of fuel.
The Russian invasion of Ukraine shocked energy markets, sending crude oil to record territory and spiking all energy prices. We’ve had increases from our heating oil suppliers of over $1.25 per gallon in less than a week. Propane prices have been better but still increased over 40 cents per gallon. And the situation remains very fluid.
We don’t know where things will go from here. One thing we can tell you is that we hate this as much as you do. Some people are under the misconception that when prices rise, we make more money. The opposite is true. People cut back usage. They have trouble paying their bills, and our receivables skyrocket. Meanwhile, we must pay our suppliers in just ten days. We must borrow much more from the bank. It is an awful mess for everyone.
One thing you can count on is that we will not let you run out. We have been in business for many years and have very strong relationships with suppliers and financial institutions. We are already getting calls from customers who are with other companies that can’t say the same. These customers are unable to get deliveries for 20 days out. You don’t have to worry about that with us.
If you are having trouble paying your bill, talk to us before it becomes a problem. Many times, we can work out something to give you more time, especially if you’ve been with us a while. We can also set you up on a monthly payment plan.
Nothing will make us happier than when prices start dropping. Until then, trust us to look out for you, and let’s pray for the people of Ukraine.