Other than a stint in Uncle Sam’s military, I have spent most all of my career working in the heating oil and equipment business and I can say that I have never experienced a winter like this one.
The no-show winter of 2012 is talked about daily by owners, technicians, suppliers and manufacturers, and it will be remembered for decades to come. There are businesses that have been on the verge of selling or have already done so. Why? Because they could not endure their losses caused by not only Old Man Winter’s lack of support, receivables, or poor decision making in some cases.
Many companies have decided to get into the low margin market in order to keep up with the discounters that are ruining their customer base. Does this make sense? Absolutely not, because if it takes a .70 cent margin to stay in business, how does a lowering the margin help pay for the fixed cost of operating the business? The fact is it doesn’t, and in fact in times like these, higher margins are necessary.
I would be willing to bet there are some owners that are going to try and sell their company just to cover their existing debt, let alone have money to enjoy the fruits of their years of hard labor and long hours. I have been told there are some oil dealers that are as much as 42 percent down in deliveries. Check the degree days—I can only remember 5 of what I would call true cold winter days.
There is yet another element, other than degree-days that have also had a direct impact on the oil dealers’ business, and that is the number of the oil to natural gas conversions that are taking place almost daily. Why, you may ask? The answer is simple, the marketing. Just listen to a radio or TV and almost every day you will hear the features and benefits of natural gas. There are the rebates still being offered that are also very convincing to an oil consumer who is in need of a new boiler. In some states the rebate for an oil to gas conversion can be over $1,000.
What rebates are available for oil equipment? Unless you can find an oil dealer who has created their own in house program, I’m not aware of any, unless the unit can perform at a 90 percent+ rating and think of how many are available—yes, there are only a few.
On the equipment sale side of the business, from the manufacturers, wholesalers to the customer, they are way below the expected levels. There is, of course, one exception of (gas) equipment. Why are customers not buying? Many say their customers can’t afford it or have decided to hold off because higher efficiency/oil savings, and with winter about over, it does not make sense at this time to invest the money even if they have it.
So, what now since we realize that it was a no-show winter and we can do nothing about it? I guess the only resolve is to hope for a better A/C season. But how about diversification? For example, think about those wall hung gas boilers that you may have installed, this is a great opportunity to create a separate service plan that will cover flushing the unit and making sure that it is operating at the highest level of efficiency that it was designed for.