State sees heating oil prices fall

Heating oil prices in Connecticut are again on a downward trend and nearing pre-pandemic levels following months of disruptions to the market that caused prices to see-saw, according to data and industry experts.

As of Aug. 9, prices were at about $2.77 per gallon, on average. That’s down by about 6 cents from the average of $2.83 reported at a summer peak June 21, according to publicly available reports from the Connecticut Department of Energy and Environmental Protection.

In October 2019, prices were at about an average of $2.74 per gallon, according to the department.

The downward trend may be due in part to concerns about the COVID-19 delta variant, which is causing surges in infections and hospitalizations in some parts of the U.S., some experts said.

“We’re really as close to normal as we’ve been for a year and a half,” said Chris Herb, president of the Connecticut Energy Marketers Association, a trade association that informs members on legislation and regulations relevant to heating oil delivery companies and gas stations and advocates for their interests.

Heating oil costs, which hinge on the price of crude oil, are affected by myriad factors from sudden storms to fluctuations in demand to global politics. Crude oil is used to create the fuel used to power vehicles and fuel heating sources, among other uses.

Earlier in the pandemic, heating oil prices plummeted from an average of $2.99 at the start of January 2020 to a low of about $1.73 per gallon in May 2020. As businesses shut their doors and people stayed home in an effort to prevent the COVID-19 from spreading, workers suddenly didn’t need to fill up their gas tanks for daily commutes, and oil supplies outpaced demand.

“There was a much greater drop when the pandemic first hit,” said David Cohen, executive vice president of Standard Oil, Inc., which delivers heating oil to a swath of southwestern Connecticut, including towns in Fairfield and New Haven counties. “That was like falling off a cliff.”

The surplus of oil and gas was unlike anything Herb has seen in his many years in the industry, he said.

Tankers and trucks sat full, waiting for a place to unload gasoline, but stations simply didn’t have the space to store it. Companies had to request special permission to sell winter-grade gasoline in the warmer months because the supply wasn’t used, Herb said.

The wide release of vaccines earlier this year led people to start travelling again and businesses to reopen, which increased demand for gasoline. As demand increased, prices started to rise again, said Steven Lanza, an associate professor in residence at the University of Connecticut's Department of Economics.

Heating oil constitutes just a fraction of all products derived from crude oil, so demand for products such as gasoline more strongly affects prices, Lanza said.

“It’s more of a regional kind of use of energy,” Lanza said. “The real big uses for oil are going to be more industrial transportation, that kind of thing.”

Last year’s drop and this year’s subsequent bounce back in heating oil prices means customers who purchased heating oil last year when prices were low may see higher bills than last year, even though prices have dropped over the past few weeks.

The delta variant could explain the cost declines, Lanza and Cohen said.

“We’ve got businesses that are delaying in-person work requirements, schools that are still masking up, businesses that are requiring patrons to wear masks inside, which is going to adversely affect folks going to restaurants and things like that,” Lanza said. “All of this kind of trickles down to markets getting skittish about what the future may hold and whether there’s going to be demand there for the future use of energy.”

But he doesn’t anticipate economic drops comparable to the magnitude of those in 2020, he said.

Rosie Stanko, vice president of the Citizen’s Oil Co-op Inc., said she doesn’t anticipate the price going more than a few cents per gallon outside of normal ranges in the winter, when more consumers are filling up their heating oil tanks. The Co-op helps its members in Connecticut and Rhode Island get discounts on heating oil and propane.

The exception, she said, might be if Delta variant infection numbers surge higher.

“If we get into Delta in a really big way, and everything closes up again, that’s really going to affect the price of oil because people will stop travelling,” she said.

Experts said because so many factors affect the cost of crude oil, it’s impossible to definitively predict prices this winter. Historically, colder weather had meant higher prices, although that’s not held true in recent years, they said.

“The news is relatively good for consumers because the trend is down, but let’s hope nothing disrupts it,” Herb said.