Heating oil costs a potential crisis

Governors of New England states are seriously concerned about heating oil prices, which have doubled in a year, saying some low income households may have to choose between food or heat. They want more federal subsidies (which only helped poor families for half of winter 2008) but given the current budget deficits, one wonders if that’s possible.

Heating oil is widely used in New England for heat. When you think about it, it’s a hugely inefficient system, as it has to be trucked individually to each home rather than coming in via pipeline to the home like natural gas does. This didn’t matter as much when prices were cheap, but the heating oil companies add a premium to the spot price to deliver, and their fuel costs for trucks are soaring too.

But replacing millions of oil furnances with natural gas is not doable, so for most in New England, the choices are oil, wood (assuming they have a fireplace), or portable electric heaters (however electricity is expensive in New England.)

We lived in Connecticut for eighteen months. Heating oil was $1.96 a gallon in winter 2007. In April 2008, when we sold the house, it was $3.67. Heating oil futures today are $4.14. Even middle class people are feeling squeezed. For the poor, this is a genuine crisis, as heating even a moderately sized house with the thermostat set very low can still cost several hundred dollars a month in winter.

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