| Rutland Fuel Company:
Market Outlook
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«click here to go back to the 2009-2010 oil heat market outlook» or scroll to bottom of page
What happened last year? Well, for one thing, the belief we expressed to our customers, that oil futures speculation (rather than supply and demand) was driving the price of oil, was dramatically confirmed. Wholesale prices have fallen a staggering $2.00 per gallon over last year and crude oil has fallen from $147 per barrel in July 2008 to a low of $34 per barrel in December and back up to a current spot price of $52 per barrel. The collapse in commodities began in August of '08 and continued unabated through the end of the year. Up until December, this pullback mirrored the broader economic collapse, but since the first of the year we have seen a floor slot into place on Crude and Heating Oil, and a rise in Gasoline prices as refiners get ready for the driving season.
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Our customers who chose one of our discount programs, as well as those who locked into a fixed-price program with
downside protection were able to take advantage of declining oil prices
after wall street's house of cards began to unravel and the investment
banks could no longer fund their speculative adventure at our mutual expense.
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These programs saved our customers roughly $1.80 per gallon on average
over the course of the season compared to those who chose a fixed-price
program without downside protection.
| ↑Click on image for↑ Video
Watch a revealing January, 2009 "60 Minutes" segment on the price of oil. Rutland Fuel
Company supports the Vermont Fuel Dealers Association's efforts to expose and bring regulation to oil futures
speculation.
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Customers who locked in without
downside protection, and found themselves unable to take advantage of
the declining market price, will note that the previous winter, this strategy worked perfectly.
Over the past four winters, what "worked" each year was the opposite of
what worked the previous year. I do my best to describe to our
customers what the current market conditions are, and explain the
potential benefits and risks of each course of action, with a firm
understanding that what worked last year is not an appropriate indicator of
what will work this year. Nevertheless, I believe that it is best to
approach a decision about what to do for next season with as much knowledge as possible.
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