Updated October 3, 2014 4:21 PM
By TOM INCANTALUPO tom.incantalupo@newsday.com

http://www.newsday.com/business/forecast-mild-winter-may-bring-lower-heating-costs-1.9461190?pts=944432

 

Long Islanders probably will spend less to keep their homes and businesses warm this winter, according to predictions by oil retailers, the local gas utility, petroleum experts and weather forecasters. The two-thirds of Long Island homes heated with oil could pay 21 percent less than they did last year, if temperatures are normal this winter — a savings of $610 for an average customer, as forecast by the Oil Heat Institute of Long Island, a trade group. Even if the winter is abnormally cold again, lower fuel oil costs should lower bills by at least 12 percent, the group said.

For those who heat with gas, the savings could be 3 percent if this winter is as cold as last, and as much as 7.5 percent if forecasts of a warmer winter prove true, said National Grid — a savings of nearly $70 for an average customer. (While the savings are lower, gas heat still costs less than oil.)

Three weeks before the unofficial Nov. 1 start of the heating season, oil averages $3.848 a gallon at full service dealers on Long Island — 20 cents or 5 percent below the price a year ago, said the state Energy Research and Development Authority.

The major reason: crude oil, the fuel's main ingredient, is trading about $10 a barrel lower than a year earlier. The U.S. benchmark grade trades in the low $90s because of factors that include increasing U.S. production and concerns about slow economic growth in some regions of the world.

Forecasters at the U.S. Department of Energy expect crude oil prices to be lower on average in 2015 — at $94.67 a barrel compared with $98.28 a barrel forecast for this year. The department is to release its winter fuels forecast Tuesday.

Many private analysts agree that fuel costs will be lower this winter.

Forecasts, of course, aren't perfect. Carl Larry, president of Oil Outlooks and Opinions LLC, an energy consulting firm in Houston, cautioned that the picture could change if geopolitical events cause crude prices to surge, or if overall economic growth and consumer spending are greater than expected. That would increase demand for fuels including diesel, which is nearly identical to heating oil and fuels trucks and industrial machinery.

"If we see more people working and spending and a colder-than-expected winter, we could definitely see incremental rises [in heating oil costs] in coming months," he said.

Last winter, extreme cold, combined with some unfortunately timed refinery shutdowns and other factors, sent heating oil prices on Long Island soaring to a new winter record on Feb. 10 — an average of $4.47 a gallon at full service oil retailers, according to the state.

The National Weather Service deemed last winter "severe." The temperatures recorded at Long Island MacArthur Airport in Islip Town over a 24-hour period averaged 2.9 degrees lower than normal in January, at 27.7 degrees; 3.1 degrees lower in February, or 29.7 degrees; and 3.5 degrees lower in March, at 35.8 degrees.

"Last season, a lot of people ended up getting at least one entire extra delivery of oil, if not two, said Michael O'Connor, director of a fuel buyers cooperative run for the public by the New York Public Interest Research Group, based in Manhattan. "That's a whole 'nother set of bills they normally wouldn't have seen," he said.

Kevin Rooney, chief executive of the Oil Heat Institute, said in an email, "At this juncture, with . . . crude prices projected to be stable or somewhat lower for the next six to 12 months and a normal to somewhat warmer normal winter projected, I am projecting that the average retail heating oil price for Long Island will be in the range of $3.65 to $3.70."

Consumption up with cold
Last winter, heating oil averaged $4.23 a gallon at full service dealers on Long Island. The cold increased consumption to an average of 683 gallons of oil, bringing the total cost for the season, including hot water, to $2,889, said the Oil Heat Institute. In a normal winter, the average house uses 616 gallons.

If temperatures return to normal this winter and oil averages $3.70 a gallon, the fuel costs from Nov. 1 to March 31 should total $2,279, according to the Institute.

Rooney noted, however, that most heating oil retailers offer fixed or capped prices before the season begins — prices that usually are lower than those reported in the state Energy and Research and Development Agency surveys.

Further, about 10 percent of Long Islanders who heat with oil opt to buy it from no-frills suppliers who offer the fuel in bulk, at floating prices, typically without free maintenance or any service at all and no budget payment plans. It's usually on a cash-on-delivery or C.O.D. basis, with slightly higher prices for credit card purchases.

Owner John Franco of CODFuel.com, a company based in Bayport that matches homeowners with such retailers, provided an example. A customer buying 200 gallons last week from one of his participating retailers would pay between $2.90 and $3 a gallon.

At one of his retailers, Wise Choice Fuel of Holbrook, owner Kevin Kallmeyer said he is offering a preseason fixed price of $3.499 a gallon for non-COD customers.

An average home uses about 880 gallons of oil for the entire year, Rooney said.

For natural gas users, National Grid forecasts that a typical homeowner's bills for the coming season, not including cooking and hot water, could be as much as 7.5 percent lower than last year. That's a total of $852 from November through March — if the weather is normal, compared with $921 last winter. The projected decline for this winter also assumes gas prices per unit equal to last year's and a 3 percent decline in the delivery charge from a state tax change. At Gelber & Associates, an energy consulting firm in Houston, senior market analyst Aaron Calder said the National Grid cost estimates are "a plausible prediction," adding that gas supplies will be stronger this winter due to continued increases in U.S. gas production and increased pipeline capacity expected to come on line next month.

National Grid said the projected cost of gas this winter — $1.18 per therm, a unit of heat measurement — is the equivalent of oil at $1.64 a gallon, a price not disputed by the Oil Heat Institute and one not seen here since the winter of 2003-2004.

Such differences in recent years have prompted some Long Islanders to convert from oil to gas. Each fiscal year since 2010, from April through March, residential and business conversions plus upgrades from gas for cooking only to gas heat, have been up 11 percent from the previous year, for a total of more than 30,800, said National Grid.

Warmer weather ahead?
This fiscal year so far, conversions are running apace with last year, the utility said.

Forecasts for a warmer winter depend largely on the anticipated formation of "El Nino," an abnormal warming of surface ocean waters in the eastern tropical Pacific. The phenomenon generally leads to warmer average temperatures across the Northern U.S., said meteorologist Dan Collins with the National Weather Service's Climate Prediction Center in College Park, Maryland.

For now, the Weather Service says there is a 40 percent chance of warmer-than-normal temperatures in the Northeast in November, December and January, a 33 percent chance of near-normal temperatures and a 27 percent chance of below-normal temperatures. The service is less sure about February.

The private, Pennsylvania-based AccuWeather also predicts normal to slightly warmer-than-normal temperatures this winter on Long Island and in New York City. "If everything goes right, your heating bills will be a lot less this year," said senior meteorologist Dan Kottlowski.

Homeowners already making plans to spend the money they'll save on oil and gas should be aware that long- range forecasts for weather are iffy.

At this time last year, for example, the energy department was forecasting heating oil prices to be lower, not higher, than the winter of 2012-2013. The reason it was wrong: the department relied on forecasts for only a slightly colder winter — not one that was 3 to 4 percent below normal. Meteorologists consider those percentage declines statistically significant.

"Nobody expected last winter to be as cold as it was," AccuWeather's Kottlowski said.