In June, the data-rich Energy Information Administration projected regular-grade gasoline prices would be at $3.48 per gallon in December.
With gas prices now dropping to a national average of $2.80, you probably don’t mind that the administration’s projection was way off.
The drop to a five-year low has been a surprise, driven by major oil producing countries giving U.S. oil producers, frackers and others interested in a higher oil price a little indigestion over the Thanksgiving holiday. North America’s producing more oil than ever — at a higher cost to extract — and Saudi Arabia led a decision by OPEC to keep oil flowing to compete.
The Governor’s Energy Office, in its latest heating fuel survey, brought that news home.
“Mainers will continue to pay much less for heating oil and gasoline at a time when temperatures are colder, and the holiday season nears,” the survey said.
Was it a mistake to convert to natural gas or wood pellets? Heating oil prices have dropped to figures Maine has not seen in years, falling to a statewide average of $2.80 per gallon in early December. That compares to a statewide average of $3.61 per gallon a year ago at this time.
For anyone who bought heating oil in September or October, it was still lower than in recent years, but not at the levels today.
That’s overall a plus for the majority of Mainers still on oil systems, but it’s not grounds to say that the aggressive conversion to natural gas heating systems has made fools of Mainers who paid to convert to what they had been told was a cheaper heating source.
People who converted to natural gas may see more modest savings against oil than they projected this summer, but they’re likely still saving.
In the background, wood pellet prices have remained low and stable since 2011, moving between $14.30 and $15.33 for an amount of pellets that will produce about 1 million British thermal units of heat.
Those in the pellet industry have made the case for the stability of wood pellet prices, as the fuel source doesn’t depend on as many regional and global economic factors before ending at the price you pay.
What’s driving the price down again? The Organization of Petroleum Exporting Countries, responsible for about 40 percent of the global oil output, decided in late November to maintain production levels to compete with a recent boost in North American crude oil production. With both sources pumping out oil, prices have fallen.
The price is expected to bounce back, as some hedge funds have taken bets to that effect, but it’s unclear just when and how. That uncertainty is magnified by the level of confusion over forecasts like EIA’s June projection, for which The Guardian reported Sunday there were few warnings in the first half of the year.
How to win. Jamie Py, head of the Maine Energy Marketers Association (formerly the Maine Oil Dealers Association), said the drop in oil prices is a good thing for customers, but he cautions that prices will go back up eventually.
“If you’re playing the commodity market, you’ve lost,” Py said. “Will oil go up again? Of course. Will natural gas go up again? Of course. And trying to make those predictions out to the future — I’d make a lot of money if I could do that.”
While it’s late in the season for heating system changes, the only surefire way to win in heating seasons ahead is reducing overall consumption and improving a building and heating system’s efficiency.
On top of that, having a system that doesn’t rely on just one fuel, or having backup heating systems can help. That includes new electric systems, which recently have gotten support from state officials.
Homeowners can get between $500 and $1,500 in incentives to install cold weather heat pumps from the state-funded Efficiency Maine Trust. Another variable in those systems is the cost of power, expected to jump for standard offer residential customers in March (it’s at about 7.6 cents).
The Governor’s Energy Office pegs the cost of 1 million Btu of electric baseboard heat at $46.89, assuming a high power cost of about 16 cents per kilowatt hour.
It’s worth noting that those comparisons don’t include many of the most important variables about how efficient a home or heating system is. That is, electric baseboard heat is considered about 100 percent efficient.
The efficiency of any other heating system can vary, and the efficiency of a system affects how much you’ll ultimately pay to heat your home to your desired temperature.