The home heating oil industry has a long and proud history, and Fuel Oil News has been there supporting it since 1935. It is an industry that has faced many challenges during that time. In its 77th year, Fuel Oil News is doing more than just holding
Issue link: http://read.dmtmag.com/i/517425
consumed the previous two heating seasons as a result of the colder weather. However, some heating fuels marketers might find their number of gallons moved less than expect- ed and not necessarily linear in relationship to the increase in HDDs. Ultimately, the specific residential or commercial property can work to put a cap on the maximum amount of fuel that can be burned on any given day. "A customer calls and says he cannot get the temperature in the house above 61°," said Philip J. Baratz, president of Angus Energy and the Managing Member of Angus Part- ners, LLC. Angus began providing hedging services in 1991. "The thermostat is set at 68° but it just won't go any higher than 61°. And the oil company is thinking about all sorts of things like, well, you need more insulation and your equip- ment might not be sized right. But at the end of the day the bigger picture is that this person's equipment is running 24 hours straight and it can't warm-up the house." He noted that customers who cannot get their homes up to 68° when it's 10° below zero, might not be able to get their homes that warm at 5° below or even 5° above zero. In that scenario the colder it gets outside the K-factor (gallons per degree day) goes a bit awry because those customers are not consuming any more oil because they just can't. One of those customers that would normally burn 1 gallon per five HDDs and then it drops another 15° is not going to burn an additional 3 gallons. "So multiply that by the number of cold days and by the number of customers and people are going to scratch their heads," Baratz said. "When people are closing the books, say in February, they are going look back and say wait a second. It was 35% colder than normal why were deliveries only 15% more than normal?" This can potentially lead to dealers making miscalcula- tions in their fuel procurement strategies. Baratz noted that from November through most of January the weather was fairly normal. The coldest weather was during the month of February. "If you're showing me a season that is steadily 10% colder every single month then you can make the argument the deliveries should have been about 10% higher than normal, but if it's all concentrated in such a short period of time people are going to scratch their heads and wonder," Baratz said. "And the worst thing that happens is they change their K-factors in their system next year and you get run outs." When a customer calls in to complain, or you notice that a customer is potentially not living in a tight house, Baratz's advice is to seize the opportunity to help those customers out—they will remember it. That can involve explaining the situation and providing the solutions or references so that he or she can get better insulation or more capable heating appliance. Further, consider tank-monitors. But if not, be a little leery of depending too much on K-Factors early next winter. www.fueloilnews.com | FUEL OIL NEWS | JUNE 2015 43 BUSINESS OPERATIONS l F O N