Heating oil forecast to peak at $3.13

PORTLAND, Maine (AP) - Heating oil prices are projected to rise modestly this winter, giving homeowners in the Northeast another year of relief from the sky-high prices they were paying two years ago.

The U.S. Energy Information Administration is projecting that average residential prices in the Northeast will climb gradually in the months ahead before topping out at $3.13 a gallon in the dead of winter. Energy analysts and oil company officials said they don't expect extreme price swings like two years ago, when prices soared to over $4.50 a gallon.

The outlook suits Charlie Webber, who last year burned about 1,800 gallons of oil to heat his farmhouse in the Portland, Maine, suburb of Scarborough. Webber, 63, thinks prices will remain flat or even drop a bit this winter and that the wild spikes in 2008 won't be repeated any time soon.

"If it got back up to $5 a gallon, I think there'd be a revolt," Webber said. "I just don't see it happening."

Homeowners in the Northeast each summer try to project what sort of heating oil bills they can look forward to during the upcoming cold-weather season. A higher proportion of people in the Northeast — New England, New York, New Jersey and Pennsylvania — use oil as their primary heating source than any region in the country. Nowhere is the reliance greater than in Maine, where 75 percent of homes are heated with oil.

Even with summer in full gear and people cooling their homes with air conditioners, people in oil-dependent states such as Maine are already reviewing different payment options with oil companies.

Oil prices rise in tandem with crude oil prices, said Neil Gamson, an economist with the EIA. Last winter, crude averaged about $77 a barrel, he said. This winter, the EIA expects oil to increase to about $81 a barrel.

"Heating oil prices'll go up if crude oil prices go up, and that's what we're projecting — but not by a lot," he said.

In its July short-term energy outlook report, the EIA said heating oil sold for $2.74 a gallon on average in the Northeast last month. The report projects that prices will gradually increase each month until they top out at $3.13 a gallon in February — a 14 percent increase from June — before beginning a gradual decline.

The EIA this fall will release its annual heating fuels winter outlook report, which provides a more detailed lookahead.

But what the market actually does is anybody's guess, said Les Thomas, owner of Cash Energy, a Scarborough-based discount oil dealer. You might as well flip a coin in guessing which way prices will go, he said.

"I think they're pretty close to what they're going to be," Thomas said.

John Peters, president of Downeast Energy in Brunswick, Maine, said there's plenty of oil in inventory and that demand hasn't taken off while the economy remains sluggish. He's also hopeful that the recent financial reform overhaul passed in Congress will result in less speculation in world oil markets, which was largely blamed when crude oil prices rocketed to nearly $150 a barrel in the summer of 2008.

"I would expect prices to remain stable or hopefully fall a little bit," he said.

Katherine Shepard, 73, of Portland isn't as optimistic. She had 100 gallons of heating oil delivered to her home on Tuesday.

"I think in all honesty the prices are going to hit us hard this winter," she said.