Volatile energy prices strain ties in Northeast

Heating oil customers are willing to pay hundreds of dollars to cancel contracts.

HARRISBURG, Pa. (AP) — A growing number of the heating oil customers who signed fixed-price contracts as costs spiked over the summer are now attempting to back out of those deals as the price of oil collapses.

Some of the customers who have read through the fine print are finding buyout clauses that can cost hundreds of dollars, but that provide a relatively cheap escape from contracts signed at the peak of an energy crisis.

Heating oil dealers, many of them mom-and-pop operations, never imagined the price of oil could drop so steeply and stand to lose a lot of money — perhaps even entire businesses.

As a result, relationships between dealers and customers has grown strained across the Northeast, where nearly two out of five households heat with oil. There are even newspaper advertisements from competitors encouraging consumers to buy out their contracts in exchange for new, less expensive offers.

When the price of crude oil peaked in June and July, the wholesale price of heating oil was above $3.70 per gallon, according to government figures. In November, those prices hovered around $1.80 a gallon, while heating oil for January delivery is down to about $1.30 a gallon.

Including the cost of delivery, a customer who signed a contract for 1,500 gallons of fuel over the summer would pay well over $6,000 for the entire winter. At today’s spot prices, customers would pay at least half that.

Dealers say the vast majority of customers have not dumped contracts. Some consumers, however, say they have no choice.

Tekla Andruchiw’s tab of $4.69 a gallon for heating oil translated into an eye-popping $530 bill last month.

“I just couldn’t believe I got myself in such a big mess,” said Andruchiw, a widow who lives off Social Security in Jamison, Pa.

The suburban Philadelphia retiree had already borrowed money from her daughter and son-in-law to pay the bill. When she saw a TV ad from Martz Oil promising rock-bottom prices, she borrowed an additional $395 to break her contract.

At Martz Oil’s new customer price of $2.09 per gallon, Andruchiw will begin saving money by mid-January.

Customers are lighting up the phone lines of state attorneys general, welfare agencies and consumer advocates in search of help. They are being advised to look for a buyout clause in the contract or to try negotiating with their dealers.

But dealers signed contracts with wholesalers based on demand over the summer, and so might be loathe to let a customer out of an agreement. No one predicted the collapse of the heating oil market, and some dealers agreed to opt-out clauses for as cheap as 30 cents a gallon.

“Some might put it at 50 cents a gallon because they assume, ‘Hey, oil prices aren’t going to drop 50 cents,’” said Matt Cota, executive director of the Vermont Fuel Dealers Association. “Well, they did.”