Fuel oil prices flirt with 16-year low in Maine as the heating season approaches

Mainers who warm their homes and businesses with heating oil are heading into a winter featuring prices that – with the exception of a sudden, global collapse in 2016 – haven’t been this low since 2004.

The average, statewide cash price for fuel oil earlier this week was $1.89 a gallon, according to the most recent survey by the Governor’s Energy Office.

But those are cash price averages gleaned from a survey of 120 dealers. Poking around online Wednesday, it’s not hard to find no-frills heating oil delivered in the state’s more populated regions for $1.50 to $1.55 a gallon.

Bargain-priced petroleum offers some financial relief to residents at a time when many are staying home around the clock because of the coronavirus pandemic.

Many residents are working or attending school remotely. Others are staying inside to minimize public contact for health reasons. Spending more time at home this winter will require more fuel to stay comfortable.

That’s a consideration for Charles Wallace in Portland. Semi-retired as of last year, his wife working remotely from home since March, Wallace said energy costs matter more now. But so does comfort.

“It’s more important to be able to keep the house a little warmer,” he said. “It’s nice we don’t have to turn the heat down.”

In a typical year, Wallace said, he’d burn 700 to 800 gallons to warm the family’s 100-year-old, two-story home. And that’s after upgrading doors and windows and installing a new furnace.

Last year, with statewide prices averaging roughly $2.60 a gallon, the cost of heat and hot water at the Wallace home would have been close to $2,000. But the U.S. Energy Information Administration is projecting that lower crude oil prices will translate into heating oil averaging 54 cents a gallon less this winter, despite a forecast for colder temperatures.

“Any time the cost of oil goes up now, it will affect us more than it used to,” Wallace said. “So (lower prices) will really help this winter, really make a difference.”

The 2020-21 heating season is starting with prices hovering at what is mostly a 16-year low, the only exception being a brief stint in the winter of 2015-16, when a global supply glut suddenly knocked average fuel oil prices in Maine to as low as $1.71 a gallon in February 2016. They rebounded the following year.

Last winter, cash prices peaked at $2.74 a gallon in January, according to energy office survey figures. This week’s average price was more than 31 percent lower.

OIL PRICES MATTER

Oil heat has fallen out of favor among government officials in Maine. To help meet aggressive goals to combat climate change, the Mills administration is actively encouraging homes and businesses to convert to high-efficiency electric heat pumps and other devices with lower carbon emissions.

But households still are more dependent on oil in Maine than in any other place in the country. Roughly six of 10 homes rely on it as the primary heat source, according to federal energy data.

So in parallel with long-term efforts to “electrify” Maine’s economy, the price of heating oil remains of critical interest to tens of thousands of residents. And going into this winter, oil burned in an Energy Star-rated boiler isn’t too much more expensive than running a ductless heat pump, according to Efficiency Maine calculations.

It’s still unclear whether low oil prices and ongoing economic uncertainty during the pandemic will prompt Mainers to hold off on switching out aging furnaces and boilers for heat pumps.

Gov. Janet Mills last year announced a goal of installing 100,000 heat pumps in Maine homes and businesses by 2025. She also increased financial incentives offered by Efficiency Maine for some high-performance units, from $500 to $1,000.

Despite the pandemic, residents have been responding, according to Michael Stoddard, Efficiency Maine’s executive director. Roughly 8,000 new heat pumps were installed in 2019. That number has doubled so far this year.

“We’re seeing a record number of heat pump installations,” Stoddard said.

Stoddard noted that because the units also function as air conditioners, they’re popular year round. That feature and low operating costs may actually give them a boost during the pandemic, with people thinking more about both heating and cooling, especially as average summer temperatures rise with the warming climate.

Felix Lincoln, an employee of Charlie Burnham Energy, delivers heating oil to a home in Freeport on Tuesday. Heating oil prices are lower now in Maine than they have been for most of the past 16 years. Ben McCanna/Staff Photographer

SOME ARE CONVERTING

That’s in line with what some full-service energy dealers are observing.

Mike Estes, owner of Estes Oil & Propane in York, said he’s seeing a surge in demand for high-performance heat pumps that qualify for the enhanced rebates.

“Naturally, people have been staying home all summer and they want to bring more comfort into their homes,” he said.

At the same time, Estes said, most customers are hanging on to their old oil burners. Replacing a central heating system can cost more than $10,000.

“A lot of people are hurting in this pandemic,” he said. “They’re hunkered down, trying to save what money they have.”

For homeowners who are replacing oil-fired central heating, roughly two-thirds are converting to propane or natural gas, according to Charlie Burnham, owner of Charlie Burnham Energy in Freeport. Some are choosing dual-fuel units that can burn oil or gas, as well as a new generation of HVAC units that can toggle between heat pump mode and gas, depending on outside temperatures.

Although people who lost jobs aren’t splurging, Burnham said he has noticed a counter-trend of homeowners investing in their living spaces to make them more efficient and comfortable. Maybe they have some extra money because they didn’t get to take vacations this year, he reasoned.

As is common, the state survey shows price variations in different regions. This week, there’s a wide, $1.16-per-gallon spread between the highest and lowest average cash prices for fuel oil – $2.74 versus $1.58.

Propane, which has grown in popularity in areas out of reach of natural gas, now warms roughly 12 percent of Maine homes, federal data show. The statewide propane price for heating this week was $2.48 a gallon, comparable to what it was last October.

The federal energy forecast agency expects Northeast households to spend on average 18 percent more this winter for propane, due to slightly higher prices and increased consumption.

Regarding consumption, both Estes and Burnham said it’s too soon to tell if customer are ordering more oil than last year, in anticipation of being at home more often. That picture will become clearer next month, they said.