Some months you find yourself searching for something to write about. This is not one of those months. As this issue goes to press, we find ourselves in the midst of an economic crisis. Lending markets have frozen, stocks have tanked, and we're winding up a contentious election that doesn't bode well for any calm approach to the problem in the near term.
Our Congress has passed a contentious bailout plan against the objections of a good percentage of the U.S. population that has already been reworked (several times) from what was initially proposed. From buying toxic loans to liquidity infusions to… well, currently, it appears some of that money is being used to fund executive perks and corporate bank mergers. There’s also talk now in the Bush administration of nationalizing the auto industry. Where are we heading, how far will it go, and where will it end?
It would be easy to get political over the two candidates, and there is very likely one that appeals more to the small business person – Joe the Fuel Oil Dealer – than the other. But, by and large, as pointed out in the last column, each of their energy policies elicit a yawn, and in a larger sense it appears to be more of a case of which one will run towards socialism and which one will merely take a brisk jog.
And now for the seemingly good, but oddly bad news.
The EIA Short Term Energy and Winter Heating Fuels Report just came out. It appears to be a bit behind the times and predicts and average cost of $3.90 per gallon and a heating cost increase per customer of $449 (23 percent). The economic collapse has resulted in a collapse in oil prices that has yet to bottom out. Unfortunately, it may not be an inaccurate prediction. Many dealers and their customers are likely locked into higher prices this year.
Dealers who did not hedge or enter into fixed price contracts with their suppliers will be in great shape. Customers who likewise did not lock themselves into fixed price contracts reflecting higher anticipated fuel prices will be in great shape if they can hook up with price-flexible dealers.
Hedging and fixed price contracts tend to work most of the time, providing risk reduction and price stability and even save the dealer and/or customer money. Of course, there are times when they can bite you in the rear end. For many people (but not for others) this is one of those times.
Should industry members try to work, from the suppliers on down, to make things right for the customer in this market? To renegotiate existing contracts to reflect wholesale current prices? Obviously, those dealers who are not locked into paying higher prices for their wholesale fuel oil like things as they are, as would those who have locked in deals that can make up for the margin challenges of the past several years.
But, we face outside competition and are an easy target for both the media and politicians with their unlimited access to the soapbox and oppressive legislation. There are free market, customer service and public relations advantages to exploring this route. At least this is not the government’s choice – for the time being.