Heating oil prices expected to be stable this winter

Homeowners who heat with oil can expect generally stable prices through the coming heating season, industry experts and government energy officials say, while some weather forecasters expect the winter to be less severe than last.

The Island's major natural gas supplier, National Grid, says its customers will pay about 10 percent less this winter than last because of declines in that fuel's prices.

Heating oil averaged $3.007 a gallon Monday at full-service dealers on Long Island, said the state Energy Research and Development Authority. That's 1.8 cents higher than a week earlier and 30.1 cents higher than a year ago.

Joe Roy, Long Island coordinator of the New York Public Interest Research Group's heating oil cooperative, said that last year at this time many fuel oil retailers shied away from offering fixed-price contracts because of bad experiences during the fall of 2008, when a sharp and unexpected drop in heating oil prices from a peak of almost $5 a gallon left many consumers who had signed relatively high fixed-price contracts furious at their retailers.

This year, Kevin Rooney, chief executive of the Oil Heat Institute of Long Island, said consumers shouldn't be surprised if retailers once again are reluctant to offer fixed or capped prices - but for a different reason: the expected stability of the market. To offer fixed or capped prices, retailers must, in effect, buy insurance against unexpected surges in price that could leave them in the position of delivering oil to customers for less than it cost them to buy it.

"When you have a market that is potentially volatile, retailers and customers want to try to lock in price as early as possible," said Rooney. "But when you have a stable market, they would have to pay a premium for the lock-ins."

Gasoline prices also have been relatively stable in the past month, with regular averaging $2.836 a gallon Wednesday on Long Island in the AAA's daily survey - down 10.5 cents from last month. Prices normally fall as the summer vacation season ends. Wednesday's average was 1.6 cents lower than a year ago.

Islandwide, regular averaged above $3 a gallon in late May as the summer driving season began but hit its seasonal peak average of $3.007 on June 1, the AAA said. In a short-term energy outlook issued Sept. 8, the U.S. Energy Department projected that the benchmark West Texas intermediate crude oil will remain at its $77 a barrel August average through the final three months of 2010 and average $82 per barrel in 2011. Crude settled at $76.02 a barrel Wednesday on the New York Mercantile Exchange.

The department predicted that natural gas prices, which averaged $4.32 per million BTU in August, will average $4.76 in 2011.

Weather2000 meteorologist Thomas Downs, based in Manhattan, says a less severe winter than last is probable because of the expectation this year of La Niña phenomenon, an irregularly recurring upwelling of unusually cold water to the ocean surface along the western coast of South America, which reduces air temperatures in the Southeast but raises them in the northern parts of the country.

"Last year was very, very snowy and pretty darn cold," he said. "I would say that compared to last year it will not be as cold or as snowy."