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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (92196)	10/17/2007 9:26:51 AM
From: Pogeu Mahone	Read Replies (1) \| Respond to of 306849

This should throw another million people out of their houses! Heating oil price hits $2.75 a gallon Analysts say record rise in state mirrors jump in cost of crude By Bruce Mohl, Globe Staff \| October 17, 2007 Heating oil customers may want to start praying for warm weather this winter. The price of crude oil surged as high as $88.20 a barrel yesterday before finishing the day's trading at $87.61, up $1.48, and heating oil prices went along for the ride. The average retail price of heating oil in Massachusetts hit a record $2.75 a gallon, up 3 cents from a week ago and 40 cents higher than it was last year at this time, according to a state survey released yesterday. Sarah Emerson, the director of petroleum at Energy Security Analysis Inc. of Wakefield, said the price of heating oil is tracking the price of crude oil, which has risen 10 percent in the last week. She said many analysts are forecasting that oil will rise a bove $90 a barrel. Even if oil prices fall back, Emerson said, the price of heating oil isn't likely to drop significantly unless the weather this winter is unusually warm. "I don't think heating oil is going to get cheaper any time soon," she said. Many analysts are attributing the run-up in oil prices to continued strong demand for petroleum worldwide and concerns about tensions between Turkey and Kurdish separatists in northern Iraq. But others are convinced that market speculators are the driving force behind rising petroleum prices. "It's not supply and demand," said Erinn Woodcock, the owner of Needham Oil and Air, a heating oil dealer. "It's the money managers who are running the market. The bulls are running the market." Woodcock said her customers are all being charged market-level prices because she isn't offering any price protection this winter, either in the form of a fixed-price contract or a cap. She said most dealers have shied away from price protection this winter because of the volatility of the markets. Emerson said speculators are probably accounting for a large chunk of the run-up in oil prices. She said speculators typically account for 15 to 18 percent of oil market activity, and right now they are buying oil futures because they believe prices will keep rising. "They can be the tail that wags the dog," she said. Emerson said the fundamentals of the heating oil market are relatively strong, but the upsurge in oil prices is swamping those fundamentals. The price of oil on the New York Mercantile Exchange closed at $87.61, up $8 in the last week. Emerson noted that the barrel price of oil translates into $2.08 a gallon. She said converting that gallon of oil into a gallon of heating oil adds at least another 60 to 70 cents in refining, distribution, and delivery costs. She said heating oil prices are rising because the cost of underlying crude is rising so rapidly. The state's retail heating oil price survey indicated the average price at full-service dealers in Massachusetts is $2.75 a gallon, up 20 cents since late August. The highest price in the survey was $3 a gallon; the lowest price was $2.50 a gallon. Earlier this month, the US Energy Information Administration forecasted that heating oil costs are likely to jump 22 percent this winter. The agency said that customers who heat with natural gas will pay higher bills as well, even though natural gas futures prices have softened in recent weeks. Philip Giudice, the commissioner of the state Division of Energy Resources, the agency that conducted the heating oil price survey, said a record is being set every week. He said the price of heating oil would probably be rising even faster if the weather was colder. "It's really tough is the bottom line of it all," Giudice said. "If we don't get warmer weather, I would expect more pain." Bruce Mohl can be reached at mohl@globe.com. © Copyright 2007 The New York Times Company