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
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editor's note 8 FEBRUARY 2014 | FUEL OIL NEWS | www.fueloilnews.com E D I T O R I A L S T A F F Editorial Office 1030 W. Higgins Road Suite 230 Park Ridge, IL 60068 847/720-5600 Publisher John Prusak 763/383-4402 jprusak@snowgoer.com Editor Keith Reid 847/720-5615 kreid@specialtyim.com Managing Editor Nicholas Upton 763/383-4466 nupton@epgmediaLLC.com Columnists Charles Bursey, Sr. Shane Sweet George Lanthier List Rentals/ Reprints – Cheryl Naughton 678/292-6054 Fax: 360/294-6054 cnaughton@specialtyim.com P R O D U C T I O N Production Manager – Karen Kalinyak Art Director – Brian Snook A D v E R T I S I N g S A L E S East – Dave Campbell, Associate Publisher 413/528-8835 Cell: 413/717-1007 dcampbell@specialtyim.com Central & South Rich Alden 603/899-3010 Fax: 603/899-2343 ralden@specialtyim.com Barbara Reynolds 603/588-2086 breynolds@specialtyim.com West – Ken Jordan 972/540-2122 Fax: 972/540-2127 kjordan@specialtyim.com M A I N O F F I C E 1030 W. Higgins Road Suite 230 Park Ridge, IL 60068 847/720-5600 • Fax: 847-720-5601 C U S T O M E R S E R v I C E 845/856-2229 • Fax: 845/856-5822 Fuel Oil News P.O. Box 4290, Port Jervis, NJ 12771 The End of Volatility? o ne theme that came out of this year's Late Winter-summer Fuels Price outlook, in this issue of Fuel Oil News, is that the abundant supply of oil, refined products from that oil and natural gas now being exploited in North America is producing a stabilizing effect on the extreme price volatility we've seen since the early- to mid- 2000s. That does not mean that we're going to see price movements over many months that never add up to more than a fraction of a cent as was the case in the "good old days." Still, the volatility and extreme refined product prices have been so frightful since at least 2007, that this represents more than just a step in the right direction. And, there is the poten- tial that we are going to see some reduction in heating oil prices. As it stands now, most of the crude we produce in the United States has to remain in the United States. To gain access to the international markets refiners are cranking out as much distillate and gasoline as they can with an eye on exports. To a great extent, the price of refined products will be determined ever increasingly by business decisions relative to which products to concentrate on at the refineries and where those products are going to go domestically and internationally. Natural gas faces a similar story. There is tremendous international demand for natural gas and the United States is only now setting up a robust export infrastructure to meet that demand. Similarly, while natural gas is a primary heating fuel it is also a primary fuel used in power generation. The move away from coal for power generation, both political and market driven, has created some spot shortages and at the same time prompted a significant expansion in infrastructure to overcome the bottlenecks causing those shortages. Just how will this play out? That's a good question. Beefing up the pipeline infrastructure, particularly in the Northeast, will invariably open up natural gas for both power generation and increased residential heating applications thus enhancing the threat of conversion. Exporting natural gas, and the increasing adoption of natural gas in power generation and other areas such as commercial motor fuels, will invariably generate extra demand to challenge what is now an abundant supply. How will the industry react? To some extent, it will be self-regulating as we have pointed out in the past. While foreign and domestic demand for natural gas will drive up prices, there is an abundant capability to bring on supply as the price point becomes favorable. And a wild card in this is that the fracking process potentially opens up similar, though perhaps not as extensive, reserves of shale gas and oil in other parts of the world. Another wildcard, which we will go into greater detail next month, is the impact of the Dodd–Frank Wall Street Reform and Consumer Protection Act that should, despite some setbacks, start having some impact on the potential speculation (or more precisely excessive investing by nontraditional parties) which we have seen since 2000. It seems as if the common sense analysis would say that heating oil will likely have more stability in price and likely have lower prices than might have been expected a few years ago. Natural gas may have a little bit more volatility and will likely have higher prices than it has seen in the most immediate past, but not likely as high as prices were traditionally. This potential shift is certainly positive for heating oil and propane dealers, should it pan out. l F o n Keith Reid