The Thanksgiving Price Tumble or The Brilliant Clarity of the Rearview Mirror

On November 17^th, one week before Thanksgiving, the heating oil market took a sharp dive.  It was only down five cents per gallon, but that was a definite reversal of the upward trend we had been experiencing for the previous 45 days.  Over the next week, the market tumbled a total of 24 cents, bringing lower retail prices with it.

But look again at that chart.  It’s a six month chart, and it shows that oil has gone (and let’s count…) Up, Down, Up, Down, Up, Down, Up, and finally Down again.  Wasn’t that fun?

Why has the price fallen so fast?  There are four domino’s to this one.

Who Works 15 Hour Days… for a Week?

Jeff, Justin, Augie, Bob, and Paul… that’s who!  These are the guys who drive our Propane delivery trucks, and they have been out from dawn until about 9:00 PM every night this week.  We think it’s been tough in the office fielding calls from

customers with Propane generators as their tanks run down.  But the drivers have been downright heroic.  It’s dark when they pull out of our yard in the morning.  It’s dark when the oil drivers

and technicians go home around 5:00 PM.  And it’s still dark as they drive around tree limbs and power wires for the next four hours.

It has been an interesting test of our infrastructure:  Can we deliver to all the propane tanks running generators if the entire county goes down for three or more days?

The answer turns out to be “Yes,” although it’s a rather tired, wheezing “Yes.”

Next week we’ll get caught up on all the non-emergencies

 

More news about our service:

Thanks Bantam Fuel

Open for Business

 

 

Hurricane Irene, the Y2K Bug, and Litchfield’s Coffee Addiction

Remember the wild-eyed guy with the robe and the sandals and the long beard, charging up and down Wall Street saying the world was going to end on New Year’s Eve when the calendar rolled from 1999 to 2000?  OK, he wore a three piece suit and really nice shoes, and there were hundreds of these prophets of doom, but they were still a bit wild-eyed.

Well, those guys told a really good story about how mainframe computers couldn’t be programmed to handle four-digit dates, so they would get all confused when the year “00” succeeded the year “99”, and they would freeze up and stop working.  Little companies were supposed to be OK because they had little computers, but big companies would fall like giants:  Banks, governments, the military, and worst of all the electric company!

Perhaps it’s just that the media loves a good scare, but they played it to the hilt, and the commercial bank who handled our business at the time really drank the Kool-Aid:  “If you guys at Bantam Fuel don’t install a backup generator, we won’t renew your loan in the summer of 1999.”  Really?  Yeah, really.

So my father and I gritted our teeth and spent about $28,000 on two huge generators, one for the office, and one for the gas station in Litchfield (now the “Bantam Fuel Mart”).  Did the power go out for three weeks on January 1^st, 2000?  Let’s not even go there… my teeth still hurt from the gritting.

But now and then the power does go out for a few hours, or even a whole day, and those stupid generators are very nice to have.  So I wasn’t surprised to see cars lined up in the road on Monday morning to get gasoline.

Even so, I was shocked when I stepped inside.  There must have been 30 people lined up like zombies for a turn at the coffee station.  These people were in desperate need of a caffeine fix, and I would have called Drug Enforcement if I hadn’t been one of them.

Apparently Dunkin Donuts and the other two gas stations had no power, and the Common Ground closed a month before (which we had absolutely nothing to do with… it was a great business).  Someone in line was tweeting to his friends that the Bantam Fuel Mart had hot coffee.  To be “tweeted” about gave me a feeling of being important and ridiculous at the same time.

So, was the generator at the gas station a wise investment after all?  Let’s see:  $28,000 divided by 35 cents profit on a cup of coffee…

 

 

 

Hurricane Irene and the Future of Fuel Delivery

       Even though Hurricane Irene was just a big, wet storm, we all lost power, most of us had flooded basements, and we all secretly worried about how bad the next one might be.  At our end of the telephone, Irene felt pretty familiar:  Lots of worried customers calling to get their tanks topped off ahead of the storm, or filled during the storm, or right after.

80% of those calls were unnecessary, but we had to take them seriously because we never really know until someone reads the gauge or until we make the delivery.  And that brings me to the future of fuel delivery!

Scheduling fuel deliveries hasn’t really changed much in the past 75 years.  We keep track of how cold it has been, and we plot that against a home’s historical pattern to predict when it will need fuel.  This “Degree Day” system works great for heating buildings, but it’s worthless at predicting fuel used for a generator.  It’s also useless for predicting fuel for pool heaters, commercial kitchens, and other irregular uses.

And that is why we made deliveries all day Sunday and Monday of Hurricane Irene… because we just didn’t know what was in those tanks.  Got it?  OK… now are you ready for the future?

Annual Discussion of Energy Prices

4/8

It’s Friday afternoon and the oil markets are just closing… 12 cents up in the last 24 hours.  Once a year I gather up all the facts about the oil market and condense it down for our readers, and today appears to be a better day than most!  But I’ll be short and to the point, don’t worry.

The price of oil is chillingly high, with retail oil exceeding $4.00 per gallon.  What factors explain it?  It isn’t explained by greedy fat cats with cigars, or by an evil, manipulative government.

 It’s explained by the supply and demand for energy, the state of the American economy, the miserable state of the US Dollar, the flight of investment dollars to commodities, explosive revolutions in seven countries at once, and an American energy policy that can only be described as insane.

 I know you don’t think I can be short and to the point, so I’m going to prove it:

Supply and Demand for Energy: The US is no longer the size of the rest of the world’s economy combined.  In fact, we represent an ever shrinking slice of that pie.  So the fact that we are still in a recession doesn’t mean the demand for oil has fallen significantly.  Other countries are experiencing economic growth, which uses energy for construction, transportation, manufacturing, etc.  In short, demand is still strong, while supply remains unchanged, which causes prices to climb.

The State of the American Economy:  The US economy is still in recession, whatever we may read in the paper.  We still have record high unemployment, record low property values, record high business failures, and empty storefronts in every town across the country.  But we are slowly coming out of recession, which means demand will soon increase (construction, transportation, manufacturing, etc.).  Since energy supply is pretty much a constant, it doesn’t take a genius to see the pinch coming.  That anticipation causes today’s energy prices to climb.

The Miserable State of the US Dollar:  Remember when you could go to Mexico on vacation and live like a king for $50 a day?  That was because of the relative strength of the Dollar vs. the Peso.  Currencies are strong when their underlying economies are strong.  When the US economy crashed in 2007 – 2008, the dollar lost value because the economy lost value.

When we printed trillions more dollars and poured them into the system to keep our economy going, that was like pouring a half cup of boiling water into your coffee cup… it’s still coffee, but it’s a lot weaker.  When we try to buy foreign oil with that weak cup of coffee called the US Dollar, guess what?  It doesn’t go as far.  I’m not saying we shouldn’t have printed the money, but it certainly caused energy prices to climb.

The Flight of Investment Dollars to Commodities:  It isn’t just oil.  Wheat, corn, and soybean prices are up over 90%.  That’s because the stock market appears very risky to investors after the crash of 2008, so the typical investment mix now includes up to 20% in commodities.  That infusion of money – from every retirement fund, every pension plan, and every hedge fund – has inflated the price of oil… some say by as much as $2.00 per gallon.

An Abundance of Caution?

Today the Consumer Product Safety Commission issued a press release alerting the public to a potential safety hazard: Some propane shipped to Connecticut in early 2010 may have been inadequately odorized.

The local TV station will run reports on how dangerous propane can be, and consumers will be encouraged to regard their propane tanks as they would armed terrorists.  Business as usual on a slow news day.

Even though the State Fire Marshal’s Office conducted a lengthy investigation and found it unlikely that any poorly odorized propane ever reached Connecticut, we are told this warning goes out “in an abundance of caution.”

Really?  The last time any improperly odorized propane could possibly have reached a consumer was September, 2010.  Four months later is “an abundance of caution?”  After much thought, I find this announcement offensive.

There is, indeed, an abundance of caution, but it has nothing to do with the Consumer Product Safety Commission, a press release, or a consumer hotline.

It seems the CPSC assumes that we never thought to check if our propane is properly odorized.  In the propane industry we are well aware of the fact that delivering gas isn’t the same as, say, delivering bark-mulch.

Safety isn’t just an afterthought… it’s what we sell.

We test our propane for proper Odorization three different times:

* When it is delivered to our facility
* When our drivers load their trucks
* When we deliver it to each customer’s tank

If we had ever received un-odorized propane, we would know it.  And yet the CPSC is basically saying: “Perhaps your propane company didn’t notice their propane had no odorant last summer.”  This is like saying: “Perhaps your ice cream store didn’t notice their freezer didn’t work last summer.”

A Plumber You Can Trust!

I don’t know about you, but my experience with plumbers over the last 25 years has been mixed. There was a guy I met in a dank basement in Brooklyn, NY who scared the daylights out of me.  Mostly because I was only 21, and he was covered with tattoos and spoke by belching through a little leather flap covering his tracheotomy.

Over the years, I’ve used plumbers at my houses and my business, and I’ve helped arrange for plumbers to take care of customers who needed work we couldn’t provide. The big plumbing outfits often seemed impersonal and expensive, and the little guys didn’t always respond promptly or were too busy to get to a job in a reasonable timeframe (or they were really scary…)

One of the bright spots in my plumbing experience has been Rick O’Dell who has run O’Dell’s Plumbing & Heating in Morris since he took over the business from his father almost 30 years ago.  Rick always called us back the same day, and he never said he was too busy to take care of us.  When my wife worked with him on a bathroom in our old house, she was comfortable that he understood exactly what she wanted, and how she wanted it done.

Rick and I were chatting recently about what our futures looked like, and I immediately realized that this was someone who shares our business values.  The conversation naturally turned to how we might join forces and offer an improved service to even more people.  Four months later, Rick has formally joined the Bantam Fuel team and now we can offer full plumbing services as well as heating, cooling, and gas piping.

Price Dishonesty

You can tell a lot about a fuel company’s character by the price they quote over the phone.  Think of it this way:  Is the quoted price a subtle deceit, or are they lying through their teeth?

Fuel companies will do almost anything to get a new customer.  Many years ago the classic giveaway was a free Service Contract.  Then when prices began to skyrocket a few years ago, homeowners became more afraid of the fuel price than repair costs.  So the giveaway became a low price on the first delivery.

But people aren’t stupid, and they learned to look past the “New Customer” price and ask what the regular, going rate was.  And many companies responded with more layers of deceit.

Now the deceit has become even more insidious.  There are three types of price dishonesty:  Seasonal Dishonesty, First Delivery Dishonesty, and Gradually Declining Dishonesty.

“Seasonal Dishonesty” is what I call it when a fuel company lowers their profit margin right down to break-even, or sometimes a loss, from May through mid-October.   The theory is that they only sell 15% of their fuel during the summer months, and that’s when most customers switch companies, so why not take a loss for that thin slice of business and then jack up the prices during the winter?

The dishonesty is in the implication that their price is always low.  They bank on the fact that people research prices and levels of service thoroughly in the summer and then never check again.  Some people never do check again, and believe they have a great price, which proves the old adage “Ignorance is bliss.”  Others have a rude awakening when they check prices in January and find they’re paying full price.

“First Delivery Dishonesty” is what I call it when a fuel company quotes a low price to a potential customer whenever they get a call.  “Is that really your price?”  “Yes, that’s really our price.”  They say this without the heavens unleashing a thunderbolt at their office because it’s true, in a way:  It really is their price to potential new customers, that day.

There’s a very good, old, full service fuel company in our area who does this all the time.  Last week the difference between new customer quote and old customer invoice was 60 cents per gallon!  Again, they figure customers won’t check prices again after making the decision to switch companies.  I’m not sure how they explain (to the few who do) that oil prices went up 60 cents a gallon in two months, but someone must be a smooth talker.

“Gradually Declining Dishonesty” is a variation on First Delivery Dishonesty.  In this case the second delivery is still at a discounted price, but the discount is not that big.  The third delivery is still discounted, but now it’s only 20 cents.  Etc.  By the time the customer gets a full priced delivery, several months have elapsed and the customer has stopped checking around.

Of Ships, Trains, Pipes and Propane

Propane just went up by almost 10 cents per gallon, and the story is surprisingly interesting.  It also goes a long way toward explaining the strange life-cycle of propane, from refineries to our tanks.

First, we all read about how they found “insufficiently odorized” propane in Massachusetts after the explosion at a construction project that killed one worker.  It turns out that propane originating in Illinois was sent out to at least 12 states with no odorant.  No one knows why it happened yet… equipment failure, human error?

Propane has no natural odor.  The refiners add a foul-smelling chemical called “Ethyl Mercaptan” to make it stink like rotten eggs so we can detect a leak.  The really clever thing about Ethyl Mercaptan is that it has no smell when burned:  It’s completely odorless when you’re cooking, but smells to high heaven when there’s a leak.  (That chemist should have received a Nobel prize…)

All this “insufficiently odorized” propane was shipped across country in rail cars, and much of it ended up at the rail terminal in Westfield, Massachusetts.  Big propane trucks (the ones you see on the highway) loaded up at Westfield and delivered into the storage tanks of area propane companies.  One of those companies delivered the propane to a construction project, and a leak went undetected.  The rest is history.

OK, here comes the interesting part.

What to do About BP

By Bantam Fuel President, Peter Aziz

The BP oil leak isn’t just a disaster, it’s shameful.  Their oil well wasn’t designed with the multiple heads considered standard safety procedure by other big oil companies, they had no plan for handling an ocean floor leak, and their CEO is yachting, Nero-like, while the ocean burns… literally.

In general I am pro-oil.  But there’s a difference between supporting the world’s dominant, low cost energy source, and supporting a company whose irresponsible cost-cutting measures have now seriously damaged our fragile environment.

We could perhaps have forgiven them if they showed some contrition, some humility, and a round-the-clock obsession with the relief efforts (especially on the part of the top brass).  Instead we got cool confidence bordering on arrogance, and an arm’s length disinterest from Tony Hayward.

As consumers of heating oil, do we have any shared liability for this disaster?  The thought crossed my mind in a philosophical way, but it’s clear to me the answer is “No.”  In fact, we are part of the solution, not the problem.  Especially Bantam Fuel customers.