Big Run up in Heating Costs this winter - No urgency?

[peakbagger]

Every indication out there is this winter is going to be record energy prices for oil, gas and electricity but I sure do not get a of a sense of urgency out there. I would guess someone heating with oil would be prebuying it if they can and natural gas folks would just be doing whatever they can to cut the amount they will use this winter. Our electric utility is doubling the energy cost portion of the bill.

Is if just that the average consumer is just taking the summer off and the crap will hit the fan this fall when the temps start dropping and the bills start coming?

 

[begreen]

It's the grasshopper and the ant tale. The panic will start in the fall. I expect there will be a lot of activity here with first-time stove owners at that time.

 

[EbS-P]

I’d be playing the oil market right now and not pre buying. Summer demand will decrease and hopefully the oil prices will back down to mid 90s.? Just a guess. If I was on natural gas I’d be coming up with another heating plan. Or picking up extra work.

I get the whole just throw your hands up and not care. If I was still living in my Old Town condo there really isn’t anything I could do. Get warmer comforter I guess. I think the place to look might be the wait list for subsidized weatherization programs.

It’s been a very profitable last two years for many. But the other side of the coin I’m sure isn’t in a better position. Getting volunteer firefighting departments staffed and trained for the the coming winter will be important as I predict an above average number of chimney fires.

 

[xman23]

Get ready, there will be panic stove buying in the fall. And all the installers will be booked up.

 

[Poindexter]

I had all my firewood for winter 22/23 stacked in the kilns in early March. I got oil delivered in January, 500 gallon in ground tank. I will probably need about 350-400 gallons to fill the oil tank in November, and a second fill in late Jan/ early Feb 23.

I did just drop $13k on a new boiler and water heater install in May 22 with all the new pumps and sensors and so on, so I am feeling a little short of cash. Once I have the boiler install under control, I am planning to get the oil tank topped off in August before prices get any higher, but that will only be 150 gallons or so on my 800-1000 gallon annual usage.

I am also concerned about food prices - a big chunk of that is diesel price and I am seeing it on the price of about everything at Kroger. The wife and I are canning just about everything we can get our hands on this summer.

Another concern I expressed to my kids twice during the late unpleasantness of 2020/2021 is I advised them to refi their student loans while interest rates were low, but they all chose to ride out the student loan holiday and they aren't any of them going to be able to lock 2-3% fixed with 20 year terms. We just printed too much money in the last two years, interest rates were going to have to go up. I got about $1700 left at 2% fixed, I was about to write a check to pay it off when the boiler went out.

The single most important thing I see is if you have variable rate debt either pay it off, refi at zero percent and pay it off before the zero % term ends, refi at whatever fixed rate you can get, or give your heart to Jesus before the bank comes for your hind end.

Another problem we probably won't see for another year or so is wage creep. I have 25 years in my profession and an hourly rate to match. If Arby's starts paying $30/ hr I will be sorely tempted to get off the high pressure merry go round and go make sandwiches. With no variable rate debt I could live on $30/hr, keep the house, and certainly enjoy my free time more than I do now. I would have to garden and can, which is kinda fun, and I would need to go get a caribou every year, but it would be a heck of a lot more fun than my current job.

I do think folks who are going to want to start burning cord wood this fall only have another 2-3 weeks to get on a wait list for install, and they should have had their cordwood split, stacked and top covered about a month ago minimum. I am not sure how much drama I will be able to take this fall, I will likely still be on the high pressure professional merry go round paying off my boiler at zero percent before the term ends; but I will try to stop by every now and again.

To the OP's question, I am not sure if it is ignorance or apathy on the part of the body politic, probably plenty of each to go around. I can see the writing on the wall, and I would love to be proven wrong, but I think this is going to be whole lot worse than the housing bubble of 2008. Fuel cost on my Tacoma was 33.9 cents per mile last week. My employer reimburses 58 cents per mile for work related miles already, and that number goes up to 62 cents per mile on July 1. But I have a seven mile commute one way to the office, I make more than $40/hr, and I am seeing the fuel price effecting my monthly balance sheet. I am still buying ribeye and Guiness, but I am not just driving 10 miles one way to Lowe's for a bolt that costs a nickel anymore.

 

[Poindexter]

It’s been a very profitable last two years for many.

It was. I averaged 55 hours per week in 2020 and 2021. I paid off a lot of stuff. I am frontline healthcare, and I am tired.

There was an article published in Nature 06-23-2022. Folks who have been vaccinated and boosted (like me) and have a recent infection with Omicron (like me, I made it 27 months without a positive test. I am pretty sure it was all those trips to the home stores and plumbing supply places for my boiler guy, I just rolled the dice too many times, I tested positive 06-02-2022) have, per the article, extremely limited immunity to Omicron BA.4 and BA.5. I see no good reason to get a second booster from the currently available first gen mRNA vaccines. I am still doing hands on patient care. There is no guarantee the next variant will be less deadly than the current ones. See Delta, qv.

I am going off on a rant here and will report myself, but first I am going to spit it out. A virus is a tiny little piece of protein. It does not have self awareness. It doesn't have emotions. It doesn't want anything other than to reproduce. It is not going to consciously mutate to a less deadly form so as to not kill off so many hosts. Tony knows better, but I have seen even him on camera talking about what a virus "wants."

There is no facebook or TikTok website all the various viral particles can log in to to talk about their feelings. They are reproducing as fast as they can, in cells that are getting sicker and sicker as the virus succeeds, and transcription errors happen in the diseased cell. There is no guarantee the next variant will be anything. Imagine you are out in the yard turning rounds into splits while you are sicker than snot. Most of your splits might look just fine, but you are going to make some variants. Some of your variants will burn just fine, some will be hard to load into a stove, some of them will elicit meaningful colorful profanity from USMC DIs.

I think I have made my point. First I shall click on 'post reply' and then I will promptly click on 'report post.' Via con Dios.

 

[tlc1976]

I got all my pellets at the beginning of June and was pleasantly surprised. Only $5 more a ton than the last 2 years. $240 vs $235. I’ve also got a spare identical stove in storage in case anything major happens to mine, got it for cheap off Craigslist last year.

Hard telling with the propane. I’ll just fill in August since historically that’s been the lowest. I fill once every 2 years since I don’t use it for heat except in an emergency. Websites don’t track propane prices during summer so I’ll just hope for the best. Not gonna call and ask constantly.

I hear a lot of people complaining about prices but don’t see many people doing much about it. Unlike the late 2000s recession, where campgrounds were empty, people were competing for roadside scrap, fixing up and modding junky gas sippers. These days I don’t see any of that.

I’m thankful now that my daughter is on her own, no more 700 miles every 2 weeks for visitation. Just 9 miles one way to work. She works at Qdoba downstate and brings home almost as much as I do, and I’ve been an engineer for 26 years. I’ll probably never see $40/hr in my lifetime, I make $24. But now I see your field, the pay makes sense.

Also food prices don’t affect me much. Because between my esophagus and digestive issues I can’t eat much. Actual meat, dairy, most bread, sugar, sodium..nope. Then only stuff that will pass thru. I often have just a can of sodium free corn or French style beans. And 65c a can is less than I ever paid for it. Some things are cheaper probably to remain as competitive as possible. With all the recalls on stuff, and the amount of moldy food I’ve seen on store shelves, I’ll stick with usually safe canned/dried/processed stuff.

I got Covid for the first time most likely from my mom who I saw for Mother’s Day. Thankfully I had it not too bad. The 2 JJ shots must have helped, since my dad and daughter had it horrible. She wasn’t eligible yet, and he’s anti. I’m still careful in stores etc like always.

 

[Ashful]

I would guess someone heating with oil would be prebuying it ..

I'm waiting until August to make any decision, see how things are looking in Moscow at that time, but it's likely I won't pre-buy this year. I usually pre-buy, and other than once (when I lost almost enough to undo the prior 5 years' savings), it usually saves me some money. But I believe oil prices are peaked right now, I really do expect them to drop during the next 12 months, the period in which I'd be using any pre-bought oil.

The Russian public and oligarchs are miserable right now, their economy is in the toilet, they can't even manufacture their basic needs. Not just the folks at the bottom of their social hierarchy this time, as is usual for that unfortunate country, now their most powerful oligarchs are losing nearly everything. The chances of Putin staying in power even another year seem to lower every day, it seems more likely that inside forces will likely remove him from power before the next heating season is half over. If or when that happens, there will be a groundswell of effort to get those international economic gears turning again. Remember the 1940's program "food for toys", between the USA and Germany, but this time it will be "food for oil" between Europe and Russia.

The heating oil and gasoline markets are complex, and I won't pretend to have any deep understanding of their correlation to the availability of oil products from Russia. I'd be interested to hear from others on what they expect the result of a likely change in power in Russia, and subsequent withdraw from Ukraine, might mean to our energy prices.

 

[EbS-P]

I'm waiting until August to make any decision, see how things are looking in Moscow at that time, but it's likely I won't pre-buy this year. I usually pre-buy, and other than once (when I lost almost enough to undo the prior 5 years' savings), it usually saves me some money. But I believe oil prices are peaked right now, I really do expect them to drop during the next 12 months, the period in which I'd be using any pre-bought oil.

The Russian public and oligarchs are miserable right now, their economy is in the toilet, they can't even manufacture their basic needs. Not just the folks at the bottom of their social hierarchy this time, as is usual for that unfortunate country, now their most powerful oligarchs are losing nearly everything. The chances of Putin staying in power even another year seem to lower every day, it seems more likely that inside forces will likely remove him from power before the next heating season is half over. If or when that happens, there will be a groundswell of effort to get those international economic gears turning again. Remember the 1940's program "food for toys", between the USA and Germany, but this time it will be "food for oil" between Europe and Russia.

The heating oil and gasoline markets are complex, and I won't pretend to have any deep understanding of their correlation to the availability of oil products from Russia. I'd be interested to hear from others on what they expect the result of a likely change in power in Russia, and subsequent withdraw from Ukraine, might mean to our energy prices.

Look to what OPEC+ is doing as it relates to prices. I don’t see regime change making a large swing in oil prices. The damage has been done. The punishments enacted are unlikely to be reversed. I don’t see how a negotiated resolution will prevail. Unless 100% of Ukraine is given back and a rebuilding package funded by Russian energy sales is part of it.

There may be pressure on Russian leaders but there is no opposition to the ruling party just different leaders in in the current party that may have different interests but probably still corrupt by our standards. Make no mistake this is a return to Cold War era rule and the only thing that broke the USSR up was states wanting independence and willing to give up all nuclear weapons for it.

Just take for instance the value of the aircraft that Russia has “nationalized” or stolen from leasing companies. It’s huge. That will likely be written off as a loss as they have no parts availability to repair and any service records if even kept will won’t be viable for an aircraft to re enter service.

Demand will drive prices. Can supply keep up with demand? EV sales will continue to push the narrative with not much real change in demand. High prices changing habits will have more impact on actual demand. Oil will be more stable than natural gas unless the gulf gets hit with repeated hurricanes. If playing the market I strongly suggest checking the NHC outlook every two-three days. Any red blobs or storms headed to the gulf I’m probably buying.

Atlantic 7-Day Graphical Tropical Weather Outlook

 

[EbS-P]

I’m going to change my wait and see position. The volatility in the market is really a commonality in everything I’m reading. It all hinges on Russia. here a worst case prediction. I’m probably buying oil in the next 6 weeks.

Bloomberg - Are you a robot?

. Edit…. JP Morgan could see oil at 380$ if Russia cuts 5 Mbpd

I think the odds of Russia cutting 3-5 million bpd are really small but…………

 

[ABMax24]

I think the odds of Russia cutting production are somewhat likely if the G7 pushes ahead with its plans. Russian (Putin) policy lends toward brinkmanship in situations like this.

A scenario exists where Russia cuts oil production by half, cutting off western nations, western oil prices hit $250/barrel (I think $380 is impossible), Russia sells its remaining exports to China & India for a "discount" of $150-$175/barrel, Russia's oil revenues stay constant, and Russia pushes western economies to the verge of collapse due to high energy prices.

I think if we sustain $200/barrel for any length of time governments will step in and force reduced pricing in the oil markets.

All of this reminds me that I need to start hauling this winters firewood home.

 

[woodey]

A scenario exists where Russia cuts oil production by half, cutting off western nations, western oil prices hit $250/barrel (I think $380 is impossible), Russia sells its remaining exports to China & India for a "discount" of $150-$175/barrel, Russia's oil revenues stay constant, and Russia pushes western economies to the verge of collapse due to high energy prices.

I would be interested in hearing the opinions of others as to how the U.S. could respond to help offset prices if the above scenario does come to fruition.

 

[brenndatomu]

I would be interested in hearing the opinions of others as to how the U.S. could respond to help offset prices if the above scenario does come to fruition.

Pump oil out of the ground, and process it...the US and Canada have plenty of capacity to take care of our own needs...but DC will just continue to play games, so better tighten your belt, things are gonna get rough.

 

[EbS-P]

I would be interested in hearing the opinions of others as to how the U.S. could respond to help offset prices if the above scenario does come to fruition.

I think we are pretty subservient to OPEC. We could enact price caps but it will be above record high prices I think and would require international support. China and India will probably continue to purchase Russian oil so……

Locally I would expect 3 or 4 day a week school and more progressive communities to invest more in public transportation maybe even making it free.

Look to our past what did we do surround the embargo? I would say we could manufacture our way out of this with strategic investments in manufacturing but we don’t have chips. Look how long it takes Tesla to get a new production line up and running. There is no magic bullet.

Pump oil out of the ground, and process it...the US and Canada have plenty of capacity to take care of our own needs...but DC will just continue to play games, so better tighten your belt, things are gonna get rough.

If was only that simple. I’m not sure we have any spare capacity. And I’m not sure nationalizing oil production would be popular with producers and big oil. If they could pump more and sell it 100$+ a barrel they would. It’s a long term game now. Not sure the cost and timeframe of drilling a new well but with the threat of a recession looming I don’t see many comfortable with assuming that level of risk.

 

[peakbagger]

For folks who have not been paying attention, the run up in refined fuels is only partially related to Russian issues, the big issue in the US is that refinery capacity, especially in the Northeast is short. There could be tankers of crude and full pipelines of crude ready and waiting in the US and the prices would still be high. The Keystone pipeline could be up and running and it still would not make a difference. Refineries cost billons to build and most indications are no new ones will get built in the US as every indication is they will be stranded assets in 15 to 20 years. Even if a company wanted to build a new one it is likely that financial firms would not lend the money as they see the writing on the wall. The Northeast lost a refinery in Philadelphia a few years back due to a big fire, if had been through a line of several owners and the final one went bankrupt and its being scrapped. The biggest refinery in the western Hemisphere, Lime Tree Bay got closed down last year in the US Virgin Islands and is being torn down. It had been closed before and then reopened by the last administration, but it was not capable of meeting emissions regulations without major reconstruction.

Folks forget, the demand for air travel dropped so much that aircraft fuel was being converted to diesel during the pandemic. The rule of thumb in most fossil fuel pricing issues is it takes 3 years for things to settle out. Its a lot easier and faster to drill for oil and gas than it is to build a refinery.

 

[brenndatomu]

In the last several weeks I've listened to several interviews with big oil execs (don't recall names, sorry) and they claim we are nowhere near refinery capacity right now...they cited some number (MBD) that we are short of our potential output.
Just so I have this clear in my head @peakbagger , you are claiming that we as a whole (USA) are refining 100% of our current capacity?

 

[EbS-P]

In the last several weeks I've listened to several interviews with big oil execs (don't recall names, sorry) and they claim we are nowhere near refinery capacity right now...they cited some number (MBD) that we are short of our potential output.
Just so I have this clear in my head @peakbagger , you are claiming that we as a whole (USA) are refining 100% of our current capacity?

It’s my understanding as well that we are at peak refining capacity.

How a massive refinery shortage is contributing to high gas prices

Oil refineries have lost capacity over recent years, making it nearly impossible to increase supply and stabilize gas prices at the pump.

www.npr.org

 

[peakbagger]

I dont have access to detailed data, I do know that refinery's have been shutting down in the US (or nearby) and not being replaced for many years and various reports I have read over the years have indicated that the US was rapidly getting short of extra capacity a decade ago. New requirements for ultra low sulfur fuels reduce thruput and the switch to low vapor pressure gasoline in summer also limits production. So take fixed and shrinking supply of refinerys compared to very rapid swing in demand since last summer and it makes sense to me.

The US would never be at 100% refining capacity as refineries need down time to maintain the equipment, It can get delayed but that just means more downtime later on.

One of members Jan is or was a refinery engineer and he would be the best to comment but last thing I knew he was concentrating on solar kilns.

 

[ABMax24]

I think we also have to consider that the refinery shortages only amount to so much, I think it's hard to attribute more than 20% of pump fuel prices to refinery capacity. Current oil prices work out to about $2.75/gallon, so that only leaves $1.25/gallon for refining, transportation, retailer markup, and taxes. With say another $1 (20%) to inflated costs from refinery capacity limitations.

We also have to consider we are right in the midst of typical peak demand for gasoline and diesel with most people normally on summer vacation and travelling this time of year, hopefully demand decreases some towards fall and prices become more realistic.

I'm really on the fence here with where fuel prices will go, and I see valid data to support a price trend in either direction. Personally I'm not stocking up on fuel, and after Covid we are sick of being in the house and are planning to leave next week with the holiday trailer and head up to the territories for a holiday. Going to be a $1500 expense in fuel for 15 days, but at this point I don't care what it costs, we're just going.

 

[peakbagger]

It comes down to supply versus demand. Limit the supply of refined products in a particular area and the price goes up. Some entrepeneur figures they can make a buck buying fuel in one area for a lower price and selling it at higher price elsewhere. His profit is added to the cost when delivered. There is currently a shortage of refinery capacity in the Northeast and the price of diesel is higher than the rest of the country as fuel is being shipped from lower cost areas. Of course, there is demand destruction factoring in, for everyone filling up a travel trailer regardless of the cost, there are people that cannot afford the premium and are staying home. This is also an international game, using balance of trade. The country with a strong currency can buy fuel away from another country with weaker currency.

 

[begreen]

This is also an international game, using balance of trade. The country with a strong currency can buy fuel away from another country with weaker currency.

This is definitely an international game. The global supply is short due to OPEC and Russia and US petroleum companies sell to the higher-priced markets for greater profits. Meanwhile, US consumption is climbing again.

The United States was a total petroleum net exporter in 2020 and 2021​

In 2021, the United States exported about 8.63 million barrels per day (b/d) and imported about 8.47 million b/d of petroleum,1 making the United States an annual total petroleum net exporter for the second year in a row since at least 1949.

Oil imports and exports - U.S. Energy Information Administration (EIA)

U.S. crude oil imports sources including OPEC and Persian Gulf, and top five source countries of U.S. oil imports and destinations of U.S. crude oil exports.

www.eia.gov

 

[peakbagger]

No doubt that it's also an OPEC plus FU for the US flooding the market a few years ago upsetting the apple cart.

 

[EbS-P]

No doubt that it's also an OPEC plus FU for the US flooding the market a few years ago upsetting the apple cart.

Do you think they are sandbagging their extra capacity? From what I gather they are claiming not to have much extra capacity and the reports seem credible based on previous record production numbers.

 

[begreen]

Oil and gas are globally priced commodities. The overseas demands are high due to shortages created by OPEC and the Ukraine war. People don't want to hear it but in this situation, there is little the US can do to affect global prices. If one wants to point a finger, it should be at Putin and the crown prince.

 

[ABMax24]

Do you think they are sandbagging their extra capacity? From what I gather they are claiming not to have much extra capacity and the reports seem credible based on previous record production numbers.

Most OPEC+ countries have failed to meet their quotas repeatedly since the beginning of the year, 14 out of the 18 with quotas to be exact.

Many of the issues are technical in nature, that should be resolved in the short term. But others are simply due to not enough production capacity to meet these quotas.

While other countries like the UAE have extra capacity available but are stymied by OPEC+ quotas. This is an issue to keep an eye on, as both Saudi (which wants to keep the current UAE quota) and the UAE aren't backing down, and could lead to some breakdown of OPEC+. Saudi also has extra capacity, but for them it's more profitable to produce less oil, but at a higher price.

Politics is also involved, current US sanctions on Iran have stymied production there, and Venezuala depends on Iranian Condensate to dilute their heavy oil for processing and shipment, which has also led to a reduction in production in Venezuela. Saudi US relations are in the toilet too, the POTUS put his foot in his mouth, calling to make Saudi's regime a Pariah. Now he's flying there to beg the regime to open the taps....