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Hurricane Katrina Boosts Heating Oil Prices in Central Pennsylvania

Posted on: Tuesday, 30 August 2005, 00:00 CDT

Aug. 30--Prices for heating oil in central Pennsylvania jumped Monday as a result of industry disruptions caused by Hurricane Katrina in the Gulf of Mexico region.

Most area dealers reported receiving notice from their wholesalers Monday morning to raise prices by 10 cents a gallon, although one said he was directed to boost his price by 15 cents a gallon.

Wholesalers and retail dealers typically reprice their entire inventory to reflect the current price of crude oil.

"It went up 10 cents a gallon as far as what I pay," said Aaron Smith of Aaron & Leonard's Fuel Oil Service in uptown Harrisburg. "It was unusual because it went up at 11 or 12 o'clock rather than 5 p.m."

Customers now pay nearly the same for a gallon of heating oil as they pay for a gallon of regular gasoline. One dealer late Monday said he was charging $2.34 for a gallon of heating oil, while another said the price was $2.29.

Harold Willis of Susquehanna Oil Co. said his price dropped 2 cents a gallon when his wholesaler contacted him around 4:30 p.m.

A significant percentage of America's oil supply is pumped and refined in areas around the Gulf of Mexico, and industry analysts had predicted as early as Sunday that the hurricane likely would cause prices for heating oil and gasoline to rise sharply.

"We should be calm and patient," Willis said of the market turbulence. "Everyone jumps in and starts crying before they know how hard they were hit. Right now, they're guessing and guessing the worst. They're cremating everybody."

Smith said his customers had been "fussing" about the price increase.

"I may have to take a [price] cut myself and limit my [delivery] area to a smaller area, Harrisburg and Steelton. Sometimes I did it farther out," he said.

Willis said he has been forced to limit "lock-in" deals, in which customers lock in a heating-oil price for the winter season, to existing customers. He said he turned away 25 people seeking such deals Monday, and as many as 200 last week.

Lock-in deals have been common among heating-oil dealers in the past, but are disappearing with the prospect of sharply higher oil prices.

Light sweet crude oil for October delivery settled Monday at $67.20 a barrel, an increase of $1.07 from Friday.

Crude futures settled at $67.49 last Thursday, the highest closing price since oil began trading on the New York Merchantile Exchange in 1983.

Oil prices would need to rise to about $90 a barrel to match the highs of 25 years ago when adjusted for inflation.

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Source: The Patriot-News

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