Heating Prices Pushing Skyward


With temperatures still hovering in the 90s, frost won't be forming on the pumpkins for a while, but even at this early date Rim country residents can plan on significantly higher heating bills this winter.

"It's not a happy story," said Mitch Vuksanovich, owner of MV Enterprises in Globe, one of the few companies still willing to deliver heating oil to Rim country customers. "This whole situation started several months ago when fuel oil was in the 80 to 90 cents a gallon range. Now it's up to $1.50 to $1.75, and I don't know where it's going to end."

Vuksanovich said that Brown Evans Distributing, which was the major supplier for this area, has pulled out of the Rim country. "We kind of inherited it through desperation," he said. "The big outfits just don't want to mess with home delivery anymore. To them, a few hundred gallons is a drop in the bucket."

While MV will continue to service the Rim country, Vuksanovich refers to himself as a "reluctant supplier. We're a small outfit with just two drivers, and we've always tried to take care of small accounts. But it takes a lot of time to hit eight or 10 homes."

Although he has received a few panicked calls from "some older widows," Vuksanovich said he thinks supplies will be adequate this winter. "A lot of people have started getting ready for winter by filling their tanks. Most have a 500-gallon tank, and that lasts them almost all winter," he said.

But he advises customers to be patient when they call. "We try to coordinate a half dozen people in the same area, so it might take a little time for us to get to them," he said. "Our customers are usually willing to help out, sometimes even riding with us to show us where addresses are."

Market flux

What Vuksanovich can't guarantee is the price his customers will pay. "I hope it will settle down at around $1.70 to $1.75 a gallon. That's not good, but it's better than the Midwest where it's at $2.35 to $2.55."

With the heating oil market relatively small in the Rim country, Vuksanovich has some long-term advice for those who still rely on it: "If I was living in Payson, I'd convert to propane," he admitted.

But those who heed his advice probably shouldn't expect any great bargains on propane either.

Propane prices on rise

Buff Cunningham, whose family owns Matlock Propane Gas and Equipment Company in Payson, said the entire crude oil industry is taking a hit.

"Propane typically trades at 65 to 70 percent of the price of crude oil. Today it's at 80 to 85 percent," Cunningham said. "We've had three very mild winters, so we think there will be enough product, but at what price we don't know."

While there is plenty of propane available today, Cunningham added, a lot of people haven't filled their tanks yet. "People were waiting for the price to take a dip to fill up, but it never happened. We've sent all of our customers a letter advising them to fill their tanks by the end of this month."

Unfortunately, price volatility has become the norm today, and Cunningham said that puts the propane industry in uncharted territory.

"In the old days, from 1937 to 1960, the price of propane never changed," he said. "Between 1960 and 1971, it went up a penny. During the oil embargo years, '71 to '73, it started changing monthly. Now it's every day.

"Since Aug. 1, it's up 15 cents to $1.15. It's been a wild ride," he said.

Global gas guzzlers

One part of the problem with propane prices, Cunningham added, is today's global economy. "There's just a lot more demand for propane," he said. "A lot of it goes to Mexico for top dollar, then the Mexican government subsidizes the price so it's cheaper to residents there than it is here. Japan is also a big user. And you have to remember that 70 percent of all the propane produced in this country goes to make Styrofoam and plastics."

While Cunningham said he's hoping for eventual price stabilization, he doesn't see it happening in the near term.

"In 1998, crude oil was at $9 a barrel," he said. Today it's at $36. Production and exploration are going full bore, and OPEC says it will release more oil. We should see some relief in maybe 18 months."

Cunningham was referring to a decision announced Monday by the Organization of Petroleum Exporting Countries to increase production by 800,000 barrels of crude daily in an attempt to stabilize volatile oil markets. But most analysts think the 3-percent boost will do little to lower prices, and some doubt OPEC nations even have that much extra capacity.

OPEC's new quota of 26.2 million barrels a day will take effect Oct. 1, and member nations have agreed to meet again Nov. 12 to reassess market conditions.

While acknowledging that some OPEC members may not be able to meet the higher quotas, Rilwanu Lukman, the organization's secretary-general, said oil supplies are plentiful and blames high fuel taxes and speculation for much of the recent increase.

No relief in forecast

Whatever the cause, Cunningham agreed with Vuksanovich that while customers can expect to pay more this winter, it could be worse. "Energy prices here are still a lot cheaper than Europe," he said.

For the record, the U.S. Department of Energy predicts that heating oil will cost one-third more than a year ago. Natural gas, from which propane is derived, is forecast to be 25 percent higher.

"We've never been here before," Cunningham said. "I've been in this business for 25 years. My dad's been in it for 50 years. We've never seen volatility like this before."

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