Delaware State News
DOVER — As winter descends on Delaware, homeowners can rest easy knowing heating oil prices are dropping steadily.
For the third straight week, heating oil prices in Delaware have fallen and sat at $3.06 a gallon, as of Friday, said Ela Voluck, spokeswoman for AAA Mid-Atlantic. Crude oil, the largest component of heating oil, has dropped considerably from its summer high of $147 a barrel to $64, as of Friday, she said.
"It’s nice to finally have some good news," said Roy R. Patterson, executive vice president of the Delaware Valley Fuel Dealers Association, as crude oil prices dip considerably lower than he had expected.
The heating oil industry, however, does not respond as quickly as gas or diesel, he said. Heating oil distributors tend to have larger inventories so it takes a while for price jumps to work their way through the system.
One problem consumers are dealing with is long-term contracts with locked-in prices. When the market spikes, consumers may enter into contracts with dealers that lock in a price, usually below market value, Mr. Patterson said.
As the market responds, consumers are sometimes left buying oil above market value for the duration of their contracts, he said. It seems unfair, but the dealers are sympathetic as they contend with the same issue when buying from their suppliers. Mr. Patterson urges consumers to honor the contracts, as the dealers have already made commitments to purchase the fuel.
"You wouldn’t go to a roulette table in Atlantic City, bet on eight and when the ball lands on seven, say ‘You know what, let me take that bet back,’" he said.
The cause for the sharp spike in crude oil prices this past summer originated with the passing of the Commodity Futures Modernization Act by the Clinton administration in 2000, Mr. Patterson said.
The act blinded the Commodity Futures Trading Commission from tracking trades on electronic energy commodities markets, he said. This created the so-called "Enron loophole."
Because there was no way of seeing who was buying what, speculation ran wild and the price skyrocketed, Mr. Patterson said. At the time, authorities said the increase was caused by Hurricane Katrina and a rising demand in China, he said, but this made no sense to the industry.
"The Gulf Coast has always been hit by hurricanes, and it’s not as if we forgot about China," Mr. Patterson said. "The truth is United States is ranked fourth in usage of oil per capita and China is ranked 57th."
The Delaware Valley Fuel Dealers Association is now making strides to undo the damage Congress caused, he said. The association pushed hard for the Commodity Markets Transparency and Accountability Act which will create more oversight to overseas markets and deter market speculators, Mr. Patterson said.
Just as the House passed the bill, prices dropped sharply despite the fact China was still using oil and there were two hurricanes off the Gulf Coast, he said. The bill sits in the Senate awaiting approval.
Mr. Patterson expects crude oil to trade at about $60-65 a barrel. However, temporary increases can develop from weather occurrences, such as a buildup of ice on waterways preventing tankers from restoring supply to major areas.
Delaware consumers fare better than the national average because of the state’s proximity to oil refineries on the Delaware River, said Gary Patterson, spokesman for the American Petroleum Institute.
"Now we just have to wait and see how cold it gets this winter." he said.
