May 21, 2018
Bangor Latest News | Poll Questions | Marijuana Ties | Mary Mayhew | Car Theft

When the price of oil has you locked in

By Abigail Curtis, BDN Staff

OLD TOWN, Maine — For Merilyn Goode, getting through this winter will be a long fight against the furnace.

The retired teacher’s aide, 65, keeps her thermostat at 60 degrees and wraps herself in layer upon layer of warm clothing. Her upstairs is blocked off with plastic sheeting. She sleeps on the sofa to conserve heat, but the cold is getting bad at night, and it’s not even November yet.

Goode’s war on the furnace is a result of something that happened last summer: oil that cost nearly $150 a barrel.

“I was so afraid of what the news was telling me,” Goode, whose only income is her $800 monthly Social Security check, said Wednesday. “I thought I’d better lock in while I have the chance.”

She had done so in previous years with good results. So in June she signed a contract to buy 700 gallons at $4.69 a gallon. That’s $3,283 worth of oil and a large percentage of her budget. The same No. 2 oil on Wednesday was selling for $2.70 a gallon in the Bangor area.

Goode’s plan now is just to make those 700 gallons last as long as possible. She is angry at the situation, though resigned to the terms of her contract.

“I think that a lot of people in this country have the legal right to steal,” she said emphatically from the living room couch.

The white-haired grandmother and widow is just one of the many Mainers who locked in their heating oil price at a time when locals and experts alike feared that the price would only go higher.

Now they wish they hadn’t, but legally there is nothing they can do.

“They’re legal contracts,” said Linda Conti of the Maine Attorney General’s Office. “We can’t advise people to breach them, because then they’re opening themselves up to a lawsuit.”

Locking in oil prices early has been good for consumers for seven out of the last 10 years, the assistant attorney general said.

Her office is encouraging Mainers to talk to their oil companies and “see if something could be worked out,” although Conti didn’t specify what that something might be.

“I think some consumers mistakenly think that because the price has gone down, the contract is somehow unfair,” Conti said.

But this line of thinking isn’t correct, say dealers, because as soon as customers like Goode locked in their oil price, the dealers bought that oil.

“The reality is, we’re not buying it today,” said Jamie Py of the Maine Oil Dealers Association. “We bought it when you told us to buy it. At that time, it was that expensive, and now the dealers are stuck with that. Widespread defaults on these things will put a lot of dealers out of business.”

The state requires oil dealers to buy at least 75 percent of their contracted oil right away. The law is intended to protect consumers from oil dealer fraud, and few could have forecast that the prices of oil would plummet as quickly as they have, dealers said.

Oil prices this summer were driven up to historic highs in part by brokers on the oil futures market, according to Py.

“Brokers are like a flock of starlings,” he said. “They start moving one way, start moving another way. You and I, at the end of the day, are subject to these crazy, volatile markets.”

And contrary to popular opinion, he said, local oil dealers are not the ones who are profiting from the wild price fluctuations.

“If there’s money that was made, it would be the hedge fund and traders and commodities guys,” he said.

Not people like Goode or Edd Johnston of Milford. Johnston, 80, is a retired University of Maine agricultural economist. He locked in his oil price at $4.92 in July — and that’s with a senior discount. He’s locked in his prices for three years with mixed results.“Trying to guess what the future is going to bring, you go on the best knowledge that you have,” he said. “Who knew that the stock market was going to drop the way it has?”

Johnston said he’d like to talk to someone at Webber Energy Fuels and see if there was some way he could get a reduced price per gallon, and he has a philanthropic idea of what to do with any reimbursed money.

“Since I’ve already paid for it, I’d be willing to contribute the difference to Crossroads or to somebody who distributes oil to those who need it and can’t pay for it,” he said.

Mike Shea, the president of Webber Energy Fuels, said his company would work with customers to help them manage their oil budget.

“We’re a very customer-friendly company,” he said. “We don’t want to lose customers. We’re not doing anything intentionally to hurt them.”

But contract-breakers might find themselves getting sued.

“Breaking a contract, which is going to have to force us to react, is not going to be the solution to the problem,” Shea said.

Instead, company officials are encouraging customers to weatherize their homes and conserve oil.

That’s something nobody needs to tell Merilyn Goode, who jumped out of her chair Wednesday afternoon when it seemed like the furnace was fighting back.

“It was set at 62, but the foolish thing turned on, so I set it back,” she said. “The colder it gets — oh, Lord, how do you explain it? If it got beyond a point when I had gone beyond my oil and the price was still high, I’d have to find another way to live.”

And as for locking in next year, forget it.

“I’ll sit here and freeze my tail off first,” she said. “It really, truly is like gambling.”


Have feedback? Want to know more? Send us ideas for follow-up stories.

You may also like