Heating oil truck drivers fill their tankers at the Buckeye Terminal in Groton Monday, January 4, 2021. (Day file photo)

By Erica Moser, The Day, October 22, 2022

Vincent Ukleja orders heating oil for his Quaker Hill home when his tank is down to half full, and when he saw the price for a delivery Monday, he was shocked. With oil at $5.19 per gallon, he spent $601.

“We’re on a fixed income, and last year, when the prices were sky-high, we barely made it through,” said Ukleja, 68. He and his wife are both retired, with Ukleja retiring as Quaker Hill fire chief earlier this year due to medical issues. With rising fuel costs, he’s looking at cutting back on food and entertainment.

“It’s just going to be a rough winter,” he said.

Jim Harmon of Montville said he and his wife ― both in their 80s ― “managed to make ends meet until the increased price of heating oil changed it all.” He said in an email they shop at Walmart to save money on groceries, started canceling magazine subscriptions, and stopped visiting family members elsewhere in the state.

“Clean energy will not heat our homes next winter, and the costs are uncertain,” he wrote in the spring. Harmon said this week his home uses about four gallons of oil a day when it’s cold ― meaning at current prices, heating costs could average out to more than $23 on a winter day.

According to the U.S. Energy Information Administration, the average price of a gallon of residential heating oil in Connecticut was $5.79 for the week of Oct. 17, up from $5.48 last week and $4.64 the week before.

Richard Funaro, spokesperson for the Connecticut Office of the Attorney General, said the energy price instability caused by Russia’s invasion of Ukraine triggered an Abnormal Market Disruption that allowed the office “to investigate and civilly prosecute price gouging related to home heating fuel and gasoline.” But he said the AMD ended a while ago and the office “does not have the statutory authority to investigate this type of alleged price gouging.”

Allen Palmer of Old Saybrook said for the past 25 years, he has pre-bought all his estimated oil for the season. He was shocked in mid-June to see his oil company’s offer of $4.90 per gallon, considering the prebuy price the previous year was $2.90.

But after reading predictions of oil shortages and a colder-than-normal winter, he accepted the offer and sent a check for $2,100.

“I questioned my decision all summer as I watched the price of home heating oil drop well below my prebuy price,” he said in an email. “However as the heating season approaches, my gamble seems to be paying off.”

According to the EIA, Connecticut has the fourth-highest share of households using fuel oil or other petroleum products for home heating, at 44%. But costs for electric and gas heating are rising as well.

“There is no running away from what’s happening with the war in Europe and its impact on all fuels. This is not just isolated to heating oils,” said Chris Herb, president of the Connecticut Energy Marketers Association. CEMA represents more than 585 members, primarily retailers but some wholesalers.

Some people are opting to burn more wood – or just sit in a red Polartec jacket under a blanket in a 58-degree house, as Maureen Gallagher of Waterford said she was doing Wednesday morning.

Old Lyme resident Mark Kurpaska said he’s glad he invested in insulation and venting to his attic in September, a decision made without knowing heating oil would rise to its current prices. Kurpaska said the total cost was $5,467 but he got a $2,650 rebate from Energize CT.

Global shocks and shocks in the supply chain

Fuel gets to Connecticut either by barges arriving in places such as Groton or New London, via trucks, from the pipeline running from New Haven to Springfield, or by rail, Herb explained.

Wholesalers then store their fuel in a terminal, whether that’s in Groton, New London, New Haven or Providence. Retailers then go to terminals to fill up their trucks; some have their own tanks whereas others deliver directly from wholesalers. Herb said most CEMA members have two or three suppliers.

For example, Advanced Heating Oil in Groton gets oil from Sprague Energy, Sack Energy, Mirabito and Global, manager Gary Paul said. He said these companies put retailers on allocation, and “thank God I can use different suppliers, because if not, I might be out of luck.”

He said the “market is overinflated,” noting it has nothing to do with retailers like himself but with Wall Street traders.

Paul gets people asking about the high prices, “What do I do?” and he tries to steer them to places like Thames Valley Council for Community Action. He said he also tries to promote TVCCA in his role as a Ledyard town councilor.

Advanced Heating Oil posts its daily prices online, now with the caveat that “due to the volatility of the market, please check our website often as prices could be changing hourly.” With this price transparency, Paul said a lot of people took advantage of lower prices in August and September, especially customers with larger tanks.

He said the average tank holds about 250 gallons of oil and the minimum fill Advanced will do is 125 gallons. Paul said higher wholesale prices end up costing his company more money because more customers want partial fills, which means workers have to go back more frequently.

At Mystic Fuel, owner Kevin Spurgas said he’s seeing people taking less fuel and only ordering what they need; a similar situation happened in April, but it wasn’t as big of a deal with summer approaching. He doesn’t blame people for not ordering if they don’t have to.

“You’re just hearing pure sticker shock, which is completely understandable on their end, but on the flip end, we’re doing everything we can,” Spurgas said. Mystic Fuel has been in operation for two decades, and Spurgas said prices are “astronomical compared to where they’ve been previously.”

Before Hurricane Ian hit in late September and before OPEC+ – the Organization of Petroleum Exporting Countries and oil-exporting allies – announced a 2 million barrel cut in oil production Oct. 5, Spurgas said oil prices had declined from the spring and he was selling for $3.89 a gallon. It rose to well over $5 a gallon this week, though prices are changing frequently.

Another factor he cited for shortages is decreased capacity at refineries due to maintenance.

In assessing the causes of spiking oil prices, Herb points to energy policy under the Biden Administration and the war in Ukraine as the “foundational macro reasons,” coupled with a current market condition called backwardation.

Herb said President Joe Biden’s first-day-in-office executive order revoking a Keystone XL permit and suspending drilling in certain areas signaled to the refining industry to pull back because extracting energy is “not a good long-term investment anymore. No one’s going to risk hundreds of millions of dollars … if the president’s telling you there’s no future of your energy.”

And now with European sanctions on Russian oil, Herb said Europe is competing for U.S. supplies. If barges and tankers leaving the Gulf Coast are enticed by high enough prices from Europe, they’re going across the Atlantic Ocean instead of New England.

He said U.S. energy policy and the war in Ukraine are influencing the current market phenomenon of backwardation, meaning the spot price ― the current price of oil ― is higher than prices trading in the futures market.

Wholesalers are seeing that oil will be less expensive in the future and therefore have no incentive to build inventory now, Herb said, meaning supplies are tight throughout the Northeast. And that means higher prices.

Last Friday, Sens. Chris Murphy and Richard Blumenthal joined 29 other senators ― mostly fellow Democrats ― in a letter urging the Department of Health and Human Services to release Low-Income Home Energy Assistance Program (LIHEAP) funds “as quickly and at the highest level possible.”

Congress secured an additional $1 billion in emergency funding for LIHEAP in its recently enacted short-term continuing resolution, which would translate to about $21 million more for Connecticut’s LIHEAP program.

LIHEAP funding is down this year because there are no more pandemic relief dollars. Connecticut Democrats have argued that the state should wait on federal dollars, whereas Republican legislators last month called for a special session to allocate more funding.

Sen. Heather Somers, R-Groton, said this past week one of the number-one issues she hears from constituents is, “How am I going to heat my home and feed my family?” She still wants to have a special session and added that Senate Republicans want to increase the salary threshold at which people qualify for assistance. Blumenthal said he thinks eligibility will be increased due to higher home heating oil costs and inflation.