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Published: Monday, 1/17/2011

Customers' conservation efforts chill demand for heating fuel

BY LARRY P. VELLEQUETTE
BLADE BUSINESS WRITER

Jim McVicker can see in his orders the results of several years of tax incentives to encourage greater energy efficiency.

"People are conserving. Your 1,200-gallon customer two years ago is down to maybe 800 or 700 gallons now," said Mr. McVicker, vice president for operations at family-owned Reliance Propane and Fuel Oil in the Trilby area of Toledo. "We've seen a lot of people do that; their usage has really tailed off."

Although prices for propane and most other heating fuels have climbed slightly this winter compared with those of a year ago, both fuel suppliers and industry analysts have begun to notice falling demand caused by nationwide efforts to improve energy efficiency.

In its latest monthly forecast, the U.S. Energy Information Agency said it expects average household expenditures for spaceheating fuels to total $990 this winter, about $22 higher than last year. The agency's short-term energy outlook for January said it is expecting higher expenditures for heating oil and propane, flat expenditures for natural gas, but lower expenditures for electricity nationwide.

The average price for propane in the Midwest was an estimated $2.16 a gallon, the lowest of any region in the United States, and about 14 percent lower than the national average, the agency said.

The price of propane -- or liquefied petroleum (LP) gas -- is closely tied to the worldwide price of crude oil, which has risen sharply in recent weeks because of several factors, including the temporary shutdown of the Alaska pipeline and increasing demand from Asia.

That's translating into a spot price of about $2.10 cents a gallon, Mr. McVicker said, "and that will probably rise to about $2.15 before we're through," with the winter heating season.

The cost of home heating oil in the Midwest has risen this winter to an average of $2.97 a gallon, up about 19 percent from the same period a year ago, according to federal energy estimates.

Federal analysts estimate the price of natural gas to be about 8 percent less than a year ago, in part because of near-record working inventories of natural-gas reserves of 3.1 trillion cubic feet nationwide, 1 percent less than the record natural-gas reserves from one year ago. The near-record inventories of natural gas are expected to remain stable this year, keeping prices of natural gas down.

In rural areas, where use of propane for home heating is more prevalent, deliveries have decreased for the last several years as customers integrated supplemental heating appliances or closed off portions of their houses, said Lud Seaman, president of Lyons LP Gas Co. Inc. in Lyons, Ohio. He said the winter weather has "been pretty typical" the last few years.

"If we look at last year's degree days as being typical, then the sales are down 10 to 15 percent from that," Mr. Seaman said, adding that a few dozen a year of his 4,000 customers are installing exterior wood-burning furnaces or geothermal heating systems. "We always have a little bit of attrition. I just see an overall reduction in our deliveries that shows that people are conserving, especially those folks that are having a little harder time paying their bills. They're finding some ways to cut their usage a little bit."

Contact Larry P. Vellequette at lvellequette@theblade.com or 419-724-6091.



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