Peak Heating Oil

Is a Heating Oil Crisis Coming?

Written by Green Chip Stocks
Posted October 15, 2012 at 1:53PM

“People still use heating oil?”

Those were the words said to me by a friend of mine who's spent 41 of his 45 years on earth in Southern California.

To be honest, I'm not sure he's ever even seen an oil delivery truck.

But here in the Northeast, there are still plenty of folks that rely on heating oil. Particularly those living in older homes in the cities, and of course up in some of the more remote rural areas of Pennsylvania, Vermont and New York, where you still can't access a natural gas line.

In any event, those who do still rely on heating oil are certainly hoping for a mild winter this year. Because according to the Energy Information Administration, a crisis could be coming.

Check out this excerpt that was recently published in the industry publication, This Week in Petroleum. . .

For the week ending October 5, distillate inventories in the U.S. Northeast (PADDs 1A and 1B) were 28.3 million barrels, about 21.5 million barrels (43 percent) below their five-year average level (Figure 1). Distillate inventories have historically been used to meet normal winter heating demand but are also an important source of supply when demand surges as a result of unexpected or extreme cold spells. The low distillate inventories could contribute to heating oil price volatility this winter. In addition, outages at several major refineries, notably Petroleos de Venezuela’s Amuay Refinery, Shell Oil’s Pernis Refinery in the Netherlands, and Irving Oil’s Saint John Refinery in Canada, have added to the fundamental market pressures in the Atlantic Basin.

Translation. . .

If you're relying on heating oil to keep your home warm this winter, you definitely should consider topping off the tank before winter kicks in, and maybe get used to wearing a light sweater.

And for more long-term planning. . .

If you can access a natural gas line, I strongly recommend making the investment. Although natural gas prices are going to start heading back up next year, there's still going to be a lot more volatility in heating oil pricing going forward.

Interestingly, up in some of the more rural areas of New York and Vermont, where heating oil is quite common, solar is quickly becoming very popular. Particularly for farmers who use solar to supplement their power generation.

One gentleman I met last week during a trip to Essex, NY installed a solar array two years ago. Since then, he's been able to offset his heating oil usage by more than 40 percent. And at the Essex Farm, owners use a sizable solar array to power their small, but profitable operation.

Not bad.

I suspect that as solar prices continue to fall while oil prices continue to rise and remain volatile, we'll see more and more solar in some of these rural areas where family farms still exist, and natural gas is not on its way.