It’s tough to know when to fill oil tank, if you can afford to

THERE ARE some who say the price of crude oil is experiencing a “psychological disconnect” from its true fundamental value.

In other words, the simple supply-and-demand equation is no longer setting the price of oil. The activity of speculators who are using the oil commodity as an alternative to investing in riskier investments such as real estate and the stock market is pushing the price higher.

It is true that oil has climbed to US$100 a barrel due to growing demand for oil from developing nations India and China. The rising price is fuelled as well by concerns in the U.S. about the falling value of the greenback. Also helping to drive up the price is the continued unrest in Nigeria and noises coming from Venezuela about nationalizing a large portion of that country’s oil sector. But the price reflects more than that.

David Collins, a vice-president at Wilson Fuel Co. in Halifax, says investors are looking for something that they can understand and that offers a reasonable return. Oil provides that. And while the continued high price will also help to reduce demand for the product and therefore lead to lower prices, predicting oil prices is almost impossible.

It is Collins’ opinion that oil inventories are increasing and there should be enough capacity within existing North American refineries to easily keep the market well-supplied with gasoline and heating oil for the next little while. It is inevitable the price will come down, says Collins. He just doesn’t know when that will happen.

For the troubled household that finds it difficult to come up with the money to put heating oil in the tank, that’s a tough spot. While some of us can wait out the market and call for delivery after the price drops a little, those living on a limited income often don’t have that luxury.

If the tank is empty, low-income families must either find a way to come up with the money for fuel or go cold. It really doesn’t matter what the per-litre price is at the time; it’s a simple matter of need.

A survey of heating oil companies in the Halifax area, which is the most competitive heating oil market in the region, shows that the lowest-priced discount oil delivery companies have their prices bumping up against 85 cents a litre. Even at that price, most of the smaller delivery companies are seeing their operating margin — the difference between the wholesale and retail price — squeezed.

The so-called full-service oil companies are charging a posted price that is much higher than that. Although they offer lower prices for those who are regular customers or who had signed up for a “cap” on the price, one must also sign up for automatic delivery, which guarantees the oil company it will be delivering a certain quantity of oil that winter.

The poor don’t have that luxury. They can’t sign up for a program they know they can’t afford.

Although some companies had been making deliveries for as little as $100 worth of fuel, fewer of the discount oil companies say they can afford to continue delivering such small amounts. The only way some can make the oil delivery business worth their effort is to insist on a larger minimum volume per delivery.

Very often that excludes those families who are most in need of oil, because they simply can’t afford to pay more for an oil delivery.

While the heating oil assistance program operated by the Salvation Army provides a stop-gap measure for some, once a family has received assistance from that program, it can’t apply for help again until the following year.

Who cares whether Premier Rodney MacDonald rings the closing bell at the New York Stock Exchange today? The closing bell ceremony, which happens every trading day, is supposed to celebrate Nova Scotia’s recent success in attracting some companies in the financial services sector to establish a presence in our province.

To help build the excitement for his largely American audience, the premier is to be accompanied by Economic Development Minister Angus MacIsaac and Stephen Lund, president and CEO of Nova Scotia Business Inc.

I suspect that will produce a big yawn from the New York audience.

Just a thought. Perhaps the premier should have arranged to bring a couple of more high-profile Nova Scotians, such as Oscar-nominated actress Ellen Page or reigning NHL MVP Sidney Crosby, along with him for the ceremony.

Then maybe someone from Nova Scotia ringing the closing bell would attract some attention.


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