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NY contractor's preseason oil offer saves many headaches

April 4, 2000
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The sudden spike in the price of home heating oil, which has more than doubled to $2 a gallon in some regions, has made life adventurous for dealers who sell the fuel and service the homes’ oil furnaces and boilers.

After years of fairly moderate prices, the last six weeks have seen a skyrocketing price hike. For many oil dealers in the Northeast, they are the ones who get screamed at.

For the past eight years, Frank Scarangello, of Scaran Heating & Air Conditioning in Staten Island, NY, has saved himself a lot of grief by offering his residential customers a preseason guarantee of $1.04 a gallon if they pay a one-time fee of $29.

About 70% of his 1,800 accounts signed on, but some who remember the previous mild winter didn’t bite.

“Too bad for them,” he says.

Scarangello also hedges his bet by buying oil futures, at between 45 and 60 cents — enough to ensure a healthy supply of the fuel. In some regions of the Northeast, even the fuel supply is in peril. Some heating companies in Long Island and Westchester County were without oil for parts of last week.

“Over the last eight years of doing this, I’ve netted out slightly ahead,” he says.

Although the heating oil price spike has made the national media sit up, that same media has reported on it so well that many consumers don’t blame the oil dealers. They have been told it’s not their fault, says Scarangello.

Federal probe

State and federal officials have been probing the price run-up, and three weeks ago, the Clinton Administration provided about $45 million to ease the strain to help poor people stay warm. Last week, the administration announced an additional $130 million. An estimated 10 to 14 million homes nationwide rely on oil for heating, with the largest concentration in the Northeast.

Energy Secretary Bill Richardson said the price hike stems from a “volatile mix of conditions,” including high oil prices, low stocks, and transportation problems.

OPEC nations rolled back production by 4.3 million barrels a day last year, causing prices to soar to nearly $30 a barrel. That cutback is scheduled to end March 1, but nobody knows if the program will be extended.

The White House said last week that it would not tap into the U.S. Strategic Petroleum Reserve.

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