The recession is driving down energy prices, making it cheaper for people to heat their homes. In the Northeast, heating oil could cost considerably less this winter than last year – except for those unlucky people who locked in a higher price last summer.
Fuel oil dealer Eddie Basile fills the oil tank at a house outside Boston, telling its owner she's getting the lowest price per gallon so far this winter: $2.39.
Home heating oil cost almost twice as much at its peak back in July. Then, fearing costs would climb even higher, many people bought contracts to lock in the going price. But the market rate went down.
Last August, Ken Glasser locked in a rate of $4 a gallon to heat his suburban Boston home. "Some years you're the dog and some years you're the hydrant," he says with a nervous laugh.
Glasser got 60 other people to join him. They included "my mother, my sister, and several of my close friends," along with friends from work and church, he says. "It's not anybody that we want to see get hurt."
Individual customers are not the only ones burned by fixed-rate contracts this year. The city of Newton, Mass., has been buying heating oil at a set price every summer for 10 years. Until now, the strategy has paid off, says Jeremy Solomon, a spokesman in the mayor's office.
"Over the course of a decade, we've saved hundreds of thousands of dollars in taxpayer dollars" by locking in early, Solomon estimates. This year, the city will have to cough up an extra $1.5 million – a struggle because the recession has already cramped the city's budget.
Tough To Break Contract
Getting out of a contract can be difficult. Sometimes, there's a termination fee — usually pretty hefty.
Jim Colloura represents the New England Fuel Institute, an association of heating oil dealers. He says his group's members have been getting angry calls from fixed-rate customers. All the dealers can do is deliver the bad news. "The contract is a contract," Colloura says. "It was offered as a service to the customer. It was no malicious intent here. ... I think this is a learning curve for everybody."
It's not just home heating oil. The recession also has lowered natural gas prices, as manufacturers have gone out of business or taken longer holiday breaks. That's giving home consumers a break – and making those who signed fixed-rate gas contracts wish they'd procrastinated.