by Jill Wagner
In this gloomy economy, there's been one bright spot: cheap gas prices!! Ok, some people may not consider $1.75 a gallon cheap, but it's all relative. Remember, it was just a few months ago, during the dog days of summer, when we were paying well over $4 a gallon. Now THAT hurts!
But then the economy tanked, and so did the price of crude oil. That's the raw stuff that gasoline and home heating oil is made of. So when the price of crude goes up---inevitably, the price at the pump and the price of home heating oil will go up too. And vice versa.
Just look at the numbers: over the summer, a barrel of crude peaked at nearly $150 dollars. Less than five months later, on December 19th, a barrel bottomed out at around $33. And even though today prices dropped again, the trend since the 19th has been back up!
I sat down today with Kevin Rooney, CEO of the Oil Heat Institute of Long Island. He says prices were artificially inflated in the summer months. And then, when prices began to come down, they collapsed further then they should have. Now the rules of supply and demand are once again straightening themselves out.
So what SHOULD prices be? Rooney thinks anywhere in the $60 to $70 range would be realistic. At that price, home heating oil should cost about $2.80-$3.00 a gallon.
But where does that leave the many Long Islanders who locked in home heating oil prices a few months back when it cost a whole lot more? If you're one of them, you may have noticed it's not so easy to get out of your contract. Rooney says that's because when a customer locks in a heating contract, the oil company then takes out their own contract with an oil supplier, and usually they have to pay a price to get out of that.
So if you haven't locked in a price, would this be a good time to do it? Rooney says it's really a gamble, but prices do seem to be heading back up.
At the gas pump, drivers don't have much choice but to grin and bear it. But there is a good website you can check out: www.gasbuddy.com. You can type in you zip code and it will give you the price of gas at stations in your neighborhood.
And before you get too down about the prices, just remember those 4 dollar a gallon days!!! Rooney says it won't go that high for a looong time.
Wait, wait, wait. One of us doesn't understand supply and demand. If there's no shortage and no surplus, then the supply and demand are balanced.
Rooney seems to be talking about something more like "the price of pain," how much you CAN charge for something before you lose too many customers. That's plain old profiteering, which I respect as a market force, but it's unfair to confuse it with supply and demand.
Frankly, I hope he's wrong. I don't care how much it costs yuppies to fill the tank of their SUVs, but low fuel costs encourage people to run businesses. That's much better for the economy than people borrowing money from banks or buying junk at the mall.
Posted by: John | January 09, 2009 at 04:07 PM