Manage Higher Heating, Fuel Costs
Oil over $60 a barrel and gas at $2.85 a gallon may seem high, but when the heating bills start rolling in later this year, these costs may seem mild when compared to the cost of heating your home this winter. Financial adviser Ray Martin offers cost-saving tips as part of his regular appearance on The Early Show.
In the past 12 months, the average retail price for a gallon of gas has risen to $2.94, up about 52 percent from $1.93, according to AAA.
If you heat your home with heating oil, expect a 65 percent jump in heating costs, up from $1.39 per gallon to $2.30 per gallon. But even this increase seems tame compared to the spike in natural gas and propane costs which are expected to be over 100 percent higher during the 2005-06 heating season versus last year.
Economists estimate that these higher costs may shave up to a point and a half off the pace of growth of the United States and world economy, which overall will still be growing. That doesn't mean much to consumers; all they know is that the high cost for gas is taking an additional $100 a month or more from their cash flow now and when an additional $300 a month is sucked out of their bank account for the higher cost of heating their home this heating season, their view of the economy, as it relates to them, will not be good.
More Are Hit Harder
These increased costs are hitting more people than ever. During the past four years there has been a surge in the number of people who have moved out of urban areas to the suburbs, a movement called exurbanization.
This movement was ignited by low fuel costs and low interest rates. The result is that there are more people driving longer commutes in SUVs to live in large houses in once rural communities.
Since 1992, the average new house size has expanded by 12 percent and the number with four or more bedrooms has surged by 37 percent, according to a recent article in BusinessWeek.
The higher heating bills will probably be the proverbial straw on the backs of many consumers this winter. What you can do now is to look over your current budget, where you spend money, and figure out what you can cut back, and how to manage the costs that you can't.
Cutting Energy Costs
Here is a list of some things to consider and you may be surprised to see how the savings can add up:
Compare costs at the gas pump and use regular grade gas. This can save up to $6 per fill up, or up to $300 per year. Also, keeping the engine tuned, your tire pressure up and your speed down, which can save an additional $250 a year.
Consider commuter options by car pooling or using public transportation, and leave the car at home. This can save on gas and tolls.
Consolidate errands into one trip or multitask on your commute by stopping to do the weeks grocery shopping on the way to home from work.
Turning the thermostat down one degree can save up to 3 percent on your heating bills. Turning it down five degrees for four hours a day can save 10 percent. In the northern part of the country, that could save $250 to $550 this winter. You can install a programmable thermostat to automatically raise and lower the temperature.
Since water heating can account for about 14 percent of your energy costs, you'll want to make some improvements in this area:
limiting hot water use can also add to the savings.
With the price of a chord of firewood over $300 (up over 50 percent from last year) fewer people may be using their fireplaces. Keeping the flue closed when not in use and using kitchen and bath exhaust fans sparingly can also help to reduce heating costs.
Weatherize and insulate your home by installing insulation in the attic and walls as needed, sealing and insulating heating ducts and sealing cracks in wall and windows. Use lower watt or energy-saving fluorescent light bulbs for additional savings.
Qualifying individuals with low incomes and the elderly are eligible for Weatherization Assistance Program benefits where, through federal and state programs, grants are provided to pay weatherization service providers to install energy efficiency measures in the homes of qualifying homeowners, free of charge.
Each state sets up its own programs and rules, but you can find out about the programs in your state by logging on to the Department of Energy Web site and search for "Weatherization Assistance Programs" or "Energy Assistance Programs" for a list of states that administer these programs.
Managing Heating Costs
Shop around for heating fuel by calling three to six providers in your local area. When doing this recently in the greater Boston area, we were surprised to find that prices can vary by 10 percent and sometimes more.
Ask friends and neighbors who they have used that has been a reliable and reputable provider and check the local listings. Getting the best deal on heating fuel can save about $150 to $250 over the heating season.
The spike in heating costs can be a shock to the household budget, so consider managing heating cost spikes by choosing to buy your heating fuel under a "Fixed Price" contract, where you pay the same cost all year long no matter what happens to heating fuel prices. You can also look into a "Cap Price" contract, where you will not pay higher than a set capped cost for heating fuel during the entire year.
With either choice, there is no free lunch; if heating fuel prices fall, the company is supposed to lower its price to you but there is no requirement to move quickly to do so. Also, if you are an existing customer, make sure your capped price is as low as what's being offered to new customers, because some companies may seek to expand their business by having existing customers subsidize lower caps being offered to new customers.
Also, consider buying your heating fuel from a "Fuel Co-op," which are generally nonprofit groups that buy oil on the open market in large quantities and pass on the savings to consumers. In some areas, you may also be able to buy heating fuel from a "Fuel Buyers Group," which are also nonprofit companies that buy from an oil company at a discount price, and pass on the savings to its members.
The people who dodged the heating fuel cost bullet this year may be those who opted to buy all of their heating fuel under a pre-paid heating fuel contract before prices surged.
Most heating fuel distributors are no longer offering these lock-in-price contracts due to the shortage of supplies, volatile prices and higher costs of storage.
If you do find a company willing to offer you a pre-paid contract, read the agreement carefully noting all terms, conditions and penalties. Also check the company?s references and pay with a credit card for the best protection if you need to dispute a charge.
Beware of disreputable companies; last year, the State of Connecticut reported that at least three companies defaulted on customers pre-paid contracts, because they found themselves in financial straits and were unable to purchase the fuel they had promised to their customers.
Heating costs are not the only cost that will be affected by higher fuel costs. If you plan a trip this winter, make sure to book your trip in advance and plan the return on a weekend. This can save over 60 percent on the cost of round trip airfare. Also, if you will need to rent a car, fill the tank yourself to save even more.