Heating costs eclipsing 2019 prices

After a pandemic-induced collapse in prices, the cost to heat a home in Connecticut with heating oil or propane has soared back and is likely to be even higher than the pre-coronavirus levels as colder months arrive.

Heating oil in Connecticut cost an average of about $3 per gallon in the last week of October 2019. In the same week this year, it was up to $3.41. In October 2019, propane was about $2.60. This year, the average is up to $3.65, according to data from the U.S. Energy Information Administration.

Residential heating oil consumers can expect a 40 percent rise compared to last year and a 15 percent increase over last five years’ average, according to a Friday news release from Gov. Ned Lamont’s office.

“Connecticut and its residents, like everyone else around the United States and the world, are unfortunately seeing the impact of rising energy prices,” Lamont said.

The release pointed to several programs to reduce utility and heating costs for Connecticut residents including a Nov. 1 to May 1 ban on heating source shutoffs for some households and heating bill assistance through the state Department of Social Services.

When demand dropped early in the pandemic, so did production. Now, oil processors are trying to catch up, but a decision by OPEC, the multinational oil producer alliance, not to significantly increase output may mean longer delays in supplies returning to normal.

When the COVID-19 pandemic started and the number of miles motorists drove fell sharply, the cost of a barrel of crude oil plummeted. Along with it came the prices of gasoline, heating oil and propane.

“I think what we’re seeing here is really the fact that there are these imbalances in supply and demand for oil, as it’s been kind of whipsawed by the pandemic and now the recovery,” said Steven Lanza, a professor at the University of Connecticut’s Department of Economics.

At their lowest during the pandemic, average heating oil prices were at $2.02 in November 2020. Propane prices’ lows were $2.46 in March 2020, according to the federal data.

“It’s a very volatile market that’s very difficult to predict,” said Rosie Stanko, vice president of the Citizen’s Oil Co-Op. “It could drop down again, even like in January. … The market seems to just have a mind of its own at this point.”

Consumers will likely see a higher price per gallon this winter than they did in 2019-20, before the pandemic, said David Cohen, executive vice president at Standard Oil of Connecticut, a distributor. The company provides both heating oil and propane.

In the past, colder temperatures meant higher prices. In recent years, the weather seems to have less of an effect unless there’s a major storm, Cohen said.

That’s partly because gasoline makes up the largest portion of crude oil use, so travel tends to influence demand more than cold weather, although an extraordinarily cold or warm winter could still have an effect, said Chris Herb, president of the Connecticut Energy Marketers Association.

Herb is hopeful that as global production ramps up and the more expensive barrels of oil are sold, prices will decrease.

UConn’s Lanza thinks it will take time for supply to normalize — perhaps up to a year — but the situation isn't permanent, he said. The price picture, aleady difficult to forecast, is further complicated in a world that has pushed to seek alternative, lower-emission energy options, he added.

President Joe Biden asked OPEC, the Organization of Petroleum Exporting Countries, to ramp up oil production, but the group on Thursday decided to continue careful monthly increases, the Associated Press reported.

Saudi Energy Minister Prince Abdulaziz bin Salman said the group was preserving market stability with more gradual production increases, the AP reported.

“Our view is that the global recovery should not be imperiled by a mismatch between supply and demand,” a White House statement said Thursday, according to the AP.

The news comes as Biden is in the midst of a global climate summit where he and other world leaders are attempting to agree on ways to reduce carbon emissions. Since taking office, his administration has cut down on U.S. oil production projects.

“I expect to see us returning to that [normal production] once this all settles out, but how long it will take the market to go through the gyrations it needs to to get back to there I’m not sure,” Lanza said.

As Connecticut consumers prepare for the colder winter months, Herb said the best thing to do to keep costs down is to get equipment checked annually to ensure it’s running at peak performance.

“The technology has come a long way in the last 30 years,” Cohen said. “New boilers are more efficient, have computerized controls.”

Joining a co-op can also help customers save money on heating oil and propane, Stanko said. The oil co-op helps its nearly 4,000 members get discounts on the heating products.

Stanko said it can be helpful to get a home energy audit. An evaluator will tell where your home is losing the most heat and ways to improve it; they’ll usually provide up to a certain dollar amount of fixes, she said.

About 20 percent of Connecticut’s heating oil customers signed contracts earlier in the year to lock them into a lower price point, Herb said.