By Joe Palumbo
If you’re a homeowner paying heating bills, you are quite aware of the increase in the price of home heating oil.
Fuel consumption for 2002/2003 has been sharply higher as a result of some tough cold weather. But it has not just been cold weather picking some extra bucks out of the family heating budget. Other factors are taking a toll.
The pending military action with Iraq is one. Chaos in Venezuela, which provides about 14 of the present U.S. oil supply, is another. Crude oil prices have climbed to around $36 a barrel on the futures market, where oil is sold to the highest bidder.
I spoke with Allison Heaney of Skaggs-Walsh, a home-heating oil and service supplier at 119-02 23rd Avenue in College Point. Heaney informed me that in the past large oil inventories were maintained. However, in today’s world major oil companies like to maintain what Heaney called a “just in time inventory system.”
It’s a system in which inventory supply is planned down to the last gallon so that when the unexpected does occur, it results in tightness of inventory. Heaney also brought to my attention that here in New York we pay a 12 cent-a-gallon premium for deliveries coming into New York Harbor considered to be in tight supply.
The impression is conveyed of an indifferent federal government. We have large oil companies that have merged such as Chevron-Texaco and Exxon-Mobil, which in most industries would raise anti-trust flags. Accepting the practice of keeping low inventories of a commodity as essential as heating oil creates nothing short of an artificial inventory shortage that forces prices higher.
I asked Heaney her biggest problem as a supplier. She quickly responded “the snow!” and cited the problems trucks face trying to get to customers, giving them top-of-the line service and, of course, keeping them warm in what has been a very cold winter. Heaney said for Skaggs-Walsh the customers and their needs are most important.
Asked whether she sees a light at the end of the tunnel in terms of the runup in heating oil, Heaney pointed out that shortly after the 1991 Gulf war prices decreased dramatically. We are coming to winter’s end and Heaney said prices are probably as high as they will go.
So how’s business for home-heating oil? The snow coupled with distressing prices has been hard on the company and the customers, but Heaney said nevertheless “we are doing just fine.”
Joe Palumbo is the fund manager for The Palco Group, Inc. and can be reached at palcogroup@aol.com or 718 461 8317.
