The First Rule of Surviving a Home Heating Dilemma: Don't Panic
Basing a decision on a week's worth of heating oil price data instead of decades' worth could be a classic switching-horses-midstream error.
A popular Internet encyclopedia begins its definition of "panic," as a "a sudden fear which dominates or replaces thinking." It's no surprise that many homeowners are suddenly fearful in the face of the recent spike in heating oil prices and it's dramatically apparent that they run the definite and potential costly risk of panic-think.
The answer is, of course, that no one has a crystal ball. But there are some very instructive lessons to find in history. In Connecticut, in 18 out of the past 20 years. Oilheat has cost less than natural gas, propane, coal, and we here in Connecticut pay the equivalent of $7.44 a gallon for electricity [@ 18c per KwH] - among the highest electricity costs in the lower 48 states.
So before anyone decides to switch heating systems for whatever is being trotted out as good for the moment, it's very important to stop, take a deep breath, and review some other known facts about home heating.
First, take stock of the value of the investment you already have in your heating system. The average heating system will last for about 25 years, so the money you have tied up in your current system is not insignificant. Upgrading an existing system can often boost efficiency at a fraction of the cost of a new system.
Second, take stock of the value of your storage tank. Older style storage tanks last for 25-30 years. New tanks are designed to last longer than that. And remember that the oil in your tank is also like having your money in your bank.
With a few thousand dollars riding on your existing oilheat system, now tack on the costs of removing the existing system and replacing it with, for example, a natural gas system if natural gas is an option in your area. Depending on the size of your home, some new installations can run as high $5,000 to $6,000.
Add the cost of removal and disposal of the storage tank (many states require that this be handled by licensed contractors), and your up about another $2,000 in out-of-pocket costs.
Clearly, a prudent consumer would want to weigh the question of switching heating fuels carefully with as much as $6,000 or more in the balance.
Where are energy prices headed? With as much as 40% of the price of a barrel of crude oil attributable to rampant and unfettered manipulation, unsupported by few if any fundamental reasons, fuel could very well be a the top of the roller coaster. All major energy sources are traded as commodities [natural gas, electricity, heating oil], so all have been and continued to be effected by speculative-driven increases we are trying to get the Congress to pay more attention to.
Regardless, we know that, over time heating oil has a steady track record of being the least expensive heating choice in most markets. We also know that natural gas prices are at surprising lows now - some say because natural gas supplies are high after an unusually cool summer, still others say because regulators are keenly focused on natural gas commodity trading in the wake of allegations of manipulation. Natural gas prices hit historic highs two years ago [$14 a mbtu], and there are no guarantees that natural gas won't be the next energy to run into price volatility again, while the call for increased scrutiny of petroleum trading - see closetheenronloophole.com - could help bring the price of oil down.
Moreover, the heating oil industry has survived two world wars, a global depression, recessions, an Iranian fuel embargo, unprecedented hurricane damage, and more. And the few price fluctuations heating oil has seen in the past have not lasted long.
If history tells us anything, it's that ponying upwards of $6,000 today to switch horses midstream in the home heating arena is about as far from a sure bet as it gets. Stop. Take a deep breath. Making a decision on weeks worth of price data instead of decade's worth of price data is doesn't make sense. We can help you control your energy costs, reduce emissions and your carbon footprint and save you money today.
See www.icpa.org/ConsumerInfo.htm
The author is Eugene A. Guilford, Jr., Executive Director of the Independent Connecticut Petroleum Association and former Chief of Staff to the General Counsel of the U.S. Department of Energy.
