"There will be fewer local heating oil dealers at the end of this season because of the difficulties of this year. These aren't multi-nation corporations who earn billions, these are local businesses who have been serving consumers in our communities for two, three and four generations. These are the heating oil retailers who are the closest to consumers, retailers who take protecting and serving their customers seriously as it is their life's work....."

HEATING OIL DEALERS SUFFER LOSSES

[Cromwell, CT]  We know that most people have enjoyed the milder weather we've had from November through Mid-January. Still, our industry has some very stark and undeniable impacts to inform you about. 

Last summer, in the midst of a large increase in world energy prices of all kinds, consumers demanded price protection plans against further increases this winter. Connecticut's heating oil dealers went out and bought contracts from their wholesale suppliers, then in turn sold fixed price and prebuy heating oil contracts to consumers. In September the world energy markets declined significantly. Shortly after these declines a few consumers assumed, incorrectly, that the contracts they signed for the winter were contracts they could walk away from. By December we saw virtually no real winter weather, which meant that consumers didn't need much of the oil they bought the previous summer. Dealers who bought the oil for consumers had to pay ever increasing fees to wholesalers as a result of not being able to pick up the wholesale oil they had purchased under contract the previous summer.

How significant is all this? The attached spreadsheet lists every oil heat state in the nation and is divided into three sections; [a] new england, [b] ny, nj and pa, [c] the rest of the oilheat states.

Look out to the right and you'll see that in New England the region is off 19% in degree days, off 280 million gallons of heating oil sales that equates to a loss of $700 million. The next region is NY-NJ-PA, down 18% in degree days, off 308 million gallons in sales and a loss of $771 million. The remaining oilheat states are down an average of 13% in degree days, off 111 million gallons of heating oil and a loss of $277 million.

In Connecticut alone, our volume of heating oil is off by 88.8 million gallons and $222 million. No wholesaler has allowed any retailer out of their contracts free - so no retailer can afford to let any consumer out of their contracts.

Local heating oil dealers are required to take all the high-priced contract gallons they bought last summer BEFORE they can start drawing on less expensive, current-market wholesale oil. With warmer weather, dealers who bought contract oil pre-August for delivery in Nov-Dec-Jan couldn't deliver all of their contract oil.

Last week we were with a small, third-generation oil dealer in New Haven who has to pay $300,000 in fees to wholesalers - above and beyond the fee for the heating oil - as penalties for not lifting contract volumes per month, or liquidating contracts because it has been too warm and no demand, or rolling a contract forward to another month. The story of this small dealer was a CBS Evening News feature shown Friday night the 26th http://www.cbsnews.com/sections/i_video/main500251.shtml?id=2404387n

The triple shocks of [a] owning high priced wholesale oil from last summer and then [b] the market collapsing and then [c] no winter to deliver into has been a very tough blow to most of these companies. The reason why we have a highly competitive industry offering a wide variety of ways to purchase heating oil and heating system service is through the hundreds of companies who compete for consumer's business. 

There will be fewer local heating oil dealers at the end of this season because of the difficulties of this year. These aren't multi-nation corporations who earn billions, these are local businesses who have been serving consumers in our communities for two, three and four generations. These are the heating oil retailers who are the closest to consumers, retailers who take protecting and serving their customers seriously as it is their life's work. We also suspect that we will see a significantly more cynical industry with regard to offering consumers contracts for oil when some consumers erroneously believe that they can demand protection one day and then walk away from it the next.

PDF File/Excel Spreadsheet Attachment

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ICPA represents more than 500 Connecticut based independent businesses. These businesses employ 13,000 Connecticut citizens and supply the majority of our state's 1,600 motor fuels outlets and 350 heating fuels dealers. ICPA's offices are at 10 Alcap Ridge, Cromwell, CT  06416.  For more information about today's Press Release, contact Gene Guilford or Chris Herb.