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 E D I T O R I A L S T A F F Editorial Office EPG Media/Specialty Information Media 3300 Fernbrook Lane N, Suite 200, Plymouth, MN 55447 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 MeritDirect, Jim Scova jscova@MeritDirect.com 914/368-1012 Reprints Robin Cooper rcooper@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 EPG Media/Specialty Information Media 3300 Fernbrook Lane N, Suite 200, Plymouth, MN 55447 C U S T O M E R S E R v I C E 847/763-9565 • Fax: 847/763-9569 Fuel Oil News PO Box 2123, Skokie, IL 60076-7823 o ne of the constants with fuel prices in the past 10 years or so has been extreme volatility. Prices as well have certainly been high, but both pre-recession and post 2008 volatility had become the normal way of business for the industry. And now, we seem to be in a "new normal"—volitility wise—that is replacing the old, new normal. The Mideast is on fire with actual and potential disruptions as great as anything seen in the past 10 years. Europe is facing instability centered on the regional energy giant Russia. For all of that, prices remain stable. This point was abundantly noted by the experts in our 2014 Heating Season Fuels Outlook in this issue. Several things had changed at the start of the 2000s that were potentially responsible for the uptick in volatility, while several things have changed recently that potentially counteract those previous changes. First, we started the 2000s in a post-Cold War boon period where developing nations were rapidly ramping up their fuel consumption, while traditional sources of supply seemed strained and more finite than ever. This was the foundation of the traditional supply and demand argument for both the high prices and volatility. Today, virtually all of that has been turned on its head. For starters, and as an aside to the fuel angle, Russia's actions along with China's are look- ing awfully familiar to those of Cold War age. Beyond that, the once booming markets, from Asia to Europe (and the United States, of course), are beginning to look shaky with significant demand destruction. After so many years where it was automatically assumed that demand would increase at a steady rate into the far future, we are now seeing opposite predictions. On the supply side, while the traditional oil and gas reserves are still strained, vast new sources of energy have been opened up through the fine-tuning and broad implementa- tion of the shale fracking process. These days it's easy to get a flashback to the 1956 George Stevens/James Dean classic movie Giant—where there are "gushers" aplenty, so to speak. That is something that was unimaginable a few short years ago. The second major shift was covered in detail in the June issue of Fuel Oil News. The Commodity Futures Modernization Act of 2000 signed into law by President Clinton created a significant deregulation of commodities. That included (among other changes) the option of trading energy commodities on deregulated exchanges and the exemption of Wall Street banks from speculative position limits when those banks hedged over-the- counter swaps transactions. The result was a high volume of highly-leveraged trading that created a "casino" atmosphere, that could be seen to both drive and thrive on long posi- tions and high volatility. As the 2000s matured, a variety of initiatives began to attempt to reign things back in eventually resulting in the Dodd–Frank Wall Street Reform and Consumer Protection Act (driven by the 2008 economic collapse), which was signed into law in 2010. While Dodd-Frank has been less than perfect due to the extreme push back from the financial industry, it has driven out many of the non-traditional players and reduced potential volatility drivers considerably. Prices are still higher than what one would like, but the volatility has been reduced enor- mously. The extent one factor the other played in this will likely be difficult to pin down, and there's no guarantee that something will come along sooner or later to reverse the trend. But for now, you just have to take what you can get and enjoy that which you can. l F o n Keith Reid 8 OCtOBER 2014 | FUEL OIL NEWS | www.fueloilnews.com Membership applied for January 2014 A new normal?