Drennen on Home Heating Prices – Hobart and William Smith Colleges \
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Drennen on Home Heating Prices

A recent article about concerns over winter energy prices features commentary by Professor of Economics and Chair of the Environmental Studies Program Thomas Drennen. The article, which appeared in the Daily Messenger newspaper, notes worries about what energy will cost this winter are already high.

“Across upstate New York worries about the upcoming winter energy bill ranks high, with 75 percent citing it among top financial concerns, according to a Siena College telephone poll of 751 upstate residents contacted between Aug. 20 and Sept. 4,” notes the article, citing last year’s harsh winter and rising costs as reasons.

Drennen points out that oil prices are significantly lower than they were last year.

“The whole market for oil is set by supply and demand,” he said. “Now we are seeing there is more supply than in the past and prices are trending down.”

A member of the HWS faculty since 1995, Drennen earned a B.S. in nuclear engineering from the Massachusetts Institute of Technology, an M.A. in public affairs from the University of Minnesota, and a Ph.D. in resource economics from Cornell University.

As a senior economist for Sandia National Laboratories, Drennen developed Alternative Liquid Fuels Simulation (ALTSim) Biofuels Model. The high-level dynamic simulation model measures the effects of alternative fuels including corn, ethanol, cellulosic ethanol, soy-based biodiesel, and diesels derived from natural gas and coal. In 2006, he received the Hobart and William Smith Excellence in Teaching Award. Drennen is also the author of a book, “Pathways to a Hydrogen Future,” which seeks to untangle competing visions of a hydrogen economy.

The full article follows and is online.


Daily Messenger
Heating costs: Prices down, worry up

Julie Sherwood • October 12, 2014

Canandaigua, N.Y.
After last year’s harsh winter, it’s no wonder the recent chill in the air has people worried. In Ontario County, more than 300 people have already applied for heating assistance through an early outreach program, and calls keep coming for the Home Energy Assistance Program, whose application period doesn’t begin until Nov. 17, said Mary Jones, who manages the program for the county.

Across upstate New York worries about the upcoming winter energy bill ranks high, with 75 percent citing it among top financial concerns, according to a Siena College telephone poll of 751 upstate residents contacted between Aug. 20 and Sept. 4. The reason for their worries: last year’s brutal weather coupled with rising home heating costs.

Thomas Drennen, professor of economics and environmental studies at Hobart and William Smith Colleges, said the good news is that oil prices are down – way down – compared to last year.

“The whole market for oil is set by supply and demand,” said Drennen, who is chair of the Colleges’ Economics Department and lives in Canandaigua. “Now we are seeing there is more supply than in the past and prices are trending down.”

On the demand side, milder temperatures should reduce homeowners’ fuel use, according to the U.S. Energy Department’s annual prediction of winter heating costs. The price of propane and heating oil should be lower, helping those customers save even more.

“Temperatures are forecast to be warmer than last winter, and that means less demand for heat,” said Adam Sieminski, administrator of the Energy Department’s Energy Information Administration, in a statement.

Drennen added that “last year the continued cold really drove prices.”

Current prices are a far cry from what they were last year at this time.

In September 2013, oil was at $110 per barrel, with prices averaging just shy of $4 a gallon statewide. And for the first time in more than a year, crude oil prices have fallen below $90 per barrel.

The average heating oil price statewide, as of Sept. 29, was $3.75 according to New York State Energy Research and Development Authority. The average cost in the upstate region, which includes Monroe, Ontario, Wayne and Yates counties, averaged $3.71.

The price of keeping warm
With folks filling home heating-oil tanks in preparation for winter, the bottom line is price. Jack Jones, a musician, author and retired journalist who lives just outside Naples on Route 53, said his research on the cost of heating the old farmhouse he shares with his wife, Susan, led to interesting discoveries.

The old house “had been remarkably cozy until last winter,” he said.
So, in getting a jump on securing a comfortable nest this winter, he compared prices and found vast differences locally.

On the website for Mid Atlantic Oil, (http://www.midatlanticoil.com/), a list of 10 oil dealers in the Finger Lakes region (with eight of those posting prices) on Monday showed a price gap as wide as 37 cents per gallon.

The lowest price was $3.46 from Glider Oil Co., Inc., Oswego County, and the highest was $3.83 from Babcock Oil Co. also in Oswego County.

Hobart’s Drennen said at those prices, wholesalers would pay about $2.68 a gallon, and so anything more customers pay covers costs that go beyond the actual cost of the oil.

Jones said he was pleased to discover a small, independent company with the best price around: $3.28 per gallon from Main Energy in Palmyra, Wayne County. Though the company is based some 45 miles from his house, Main Energy delivered without a fee, and Jones said he saved about $160 on about 250 gallons of oil.

“We are the small guys that keep the big guys honest,” said Main owner Jim Blazey, 48, a third-generation businessman who started out in the equipment business for lawn and garden and tractors, then branched out into being an oil dealer to take him through the winter.

Blazey said Naples is within his coverage area, which spans some 50 miles from his home base in Palmyra. While the market drives prices, because he has a small operation with less overhead than the big companies, he has less expenses and passes that savings on to customers, he said.

Blazey said demand for heating oil is high locally, keeping him busy. His business of just a few employees works as a team to serve customers, he said.

“We don’t have a lot of white collar in my business, and so we don’t have much overhead,” Blazey said.

Natural gas cheapest choice
At Finger Lakes Community College, Chris McNamara, associate professor of business, said that while ample supply of oil is expected to help keep prices down this winter compared to last winter, heating with oil is not the best choice for price. An increasing number of homes nationwide heat with natural gas, he said. Even in New England, where an abundance of older homes heat with oil, newer houses are being built to heat with natural gas.

McNamara said natural gas “is a lot cheaper and easier to burn,” as homeowners don’t have the maintenance costs associated with oil.

Nearly half the nation’s households heat with natural gas, and they will see an increase in prices, especially in the Northeast. On average the retail price will rise 5.8 percent to $10.57 per 1,000 cubic feet. Northeast customers could see a rise of as much as 6.8 percent, to $12.42 per 1,000 cubic feet, the highest in the country, according to the Energy Department.

Still, the average natural gas bill for the October-to-March heating season is expected to fall, to $649 from $680 last year, because customers are expected to use less.

Natural gas wholesale prices are higher than they were last year, in part because last year’s cold winter drained stockpiles, which are 11 percent below their five-year average for this time of year. New England prices are higher because there is not enough space on existing pipelines to carry the increasing amount of gas needed in the region for heating and generating electricity.
Electricity prices are heavily influenced by natural gas prices, so they’re on the rise. But electricity customers should use less this winter, resulting in lower heating bills for many, according to the Energy Department.

The Associated Press contributed to this story.

By the numbers
$3.71 Heating oil price per gallon, Western NY
$3.75 Statewide
SOURCE: New York State Energy Research and Development Authority (NYSERDA) Heating Fuels Report, prices for Sept. 29, 2014, rounded to nearest penny; Western New York region (includes Monroe, Ontario, Wayne and Yates counties)
Sampling of local heating oil prices
10 Oil dealers listed
$3.83 Highest price listed, Babcock Oil Co., Oswego County