High prices and volatile markets make the heating season uncertain in central Pa.

High prices and volatile markets make the heating season uncertain in central Pa.

It starts with far-off problems — COVID-19 lockdowns, Russia’s invasion of Ukraine, low investment by oil and gas companies — but eventually, vast upheavals in energy markets ripple through.

“I almost passed out,” Wendy Sweigert said of her recent $589 bill for 100 gallons of heating oil. “We are supplementing it with heaters, but the electricity has also increased, so it’s a no-win situation.”

Sweigert, of Lower Allen Township, is just one example of Harrisburg-area residents — and across the country — facing an uncertain winter amid what is expected to be a sustained rise in heating prices driven by unprecedented volatility in energy markets.

“There are a multitude of factors, and they change, and that makes it difficult to strategize with clients on what to do, because there’s no clear idea where things are going to go,” said Will Muller, director principal of business development at Shipley Energy, which delivers heating fuels statewide.

A gallon of heating oil in Pennsylvania costs an average of $5.84 in the first week of November, according to the Energy Information Administration (EIA). At the same time in 2021, it was $3.22; in 2020, $2.03.

Based on current market trends and weather conditions, the EIA expects the overall cost of heating oil for the average US household to increase 27% this winter compared to a year ago. Households using natural gas are indexed at 28%; 10% electric and 5% propane.

Such projections are tenuous, according to Muller and other industry observers, given the extreme volatility in heating energy markets. When Saudi Arabia and its oil-producing partners announced production cuts a few weeks ago, fuel oil prices fluctuated 80 cents per gallon in a single day.

“It’s crazy,” Muller said. “We haven’t seen anything like it in a very long time.”

The volatility “is in every possible direction,” said Wes Warehime, chief financial officer of Aero Energy, another large Pennsylvania heating fuel retailer. “The whole industry is really tough right now.”

A widow, Sweigert depends on social security for her income. She lives with her daughter, who works full time and is able to help pay some of the rising costs.

“We bundle up and just try to ride out the really cold temperatures,” Sweigert said, and she plans to keep the thermostat at 62 degrees for as long as she’s physically able.

“If we get really bad temperatures in the teens or single digits I’m definitely going to bump it up to 64 but I hate to go beyond that because the way it’s set right now I can go about eight weeks tankless,” Sweigert said.

Pennsylvania offers the Low Income Home Energy Assistance Program (LIHEAP), a benefit jointly funded by the state and federal government, which pays money to eligible households to help pay their heating bills. During the 2020-21 winter season, the average LIHEAP-qualified household received a $280 benefit, according to data provided to PennLive by the PA Department of Human Services.

During the 2021-22 season, as energy costs rose, that amount more than doubled, to $570 per eligible household.

Industry experts say demand for heating fuels – especially oil and natural gas – simply outstrips supply, inflating prices as buyers are willing to pay more and more to secure limited inventory. .

Years of low energy prices have resulted in lower capital investment by producers; the number of natural gas rigs had shrunk and oil companies had closed refineries, with national refining capacity now at its lowest level since 2014, according to the EIA.

“We can drill and drill and drill,” Warehime said, “but without the refining capacity, it creates problems with the oil.”

The rapid recovery of the U.S. economy from COVID-19 has provided a boost, particularly due to high diesel consumption in the trucking industry, although diesel production has remained slow due to the pandemic . While this affects energy markets as a whole, it directly affects fuel oil prices, since the two are similar petroleum-based substances.

With the Federal Reserve rapidly raising interest rates to dampen inflation and the associated risk of recession, energy producers are keeping inventories low to avoid producing higher cost products now that will sell for less in the future.

This creates less of a buffer between production and retail, Muller and Warehime said, and is the root cause that residential customers are now feeling every bump in the market, especially as the Russian invasion of the Ukraine has created new shortages in Europe.

“It kind of imploded any progress we might have made in the previous months,” Muller said of the war in Ukraine.

High prices have caused energy companies’ margins to skyrocket, to the point that President Joe Biden launched an excess profit tax designed to force them to reinvest windfall profits in expanding production capacity, instead to use it to strengthen their position on the Rue wall.

But despite record profits, Chevron CEO Michael Wirth told the Washington Post earlier this year that he still does not expect the United States to increase refining capacity anytime soon, given the return extremely long investment.

Similarly, Pennsylvania natural gas giant Range Resources said late last month that it plans to take record cash flow from its existing wells and pour money into tripling its share buyback program.

For receiving customers, watching market prices closely and trying to buy at the lowest has become increasingly common.

“We started noticing that customers are more in tune with prices due to volatility,” Muller said. “I think they may be more in tune with the market than they like.”

For residents like Sweigert, this also means retreating elsewhere.

“I’ve always been used to being frugal, but maybe that means not running and running errands if I see we’re low; I’m waiting for my next check to come in,” she said.

Friends, neighbors and even her landlord have offered to help out to get her through the winter, said Sweigert, a support network not everyone can count on.

“I’m very lucky,” she said. “Unfortunately, not everyone has that.”

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