December 12th, 2008
07:19 PM GMT
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LONDON, England – In life, there are always decisions you want to keep on putting off. In my case, the one that always stresses me out centers on the heating oil tank in my garden.

 It's no great beauty - a big green plastic job that could probably swallow up two entire bedrooms in one of those Japanese capsule hotels, but which apparently holds 2,500 liters of fuel.In these days of wildly fluctuating crude prices, working out when to fill the wretched thing is a task requiring the greatest wisdom, calculation and foresight.

The seesawing price of oil has given consumers worldwide much to consider during 2008.
The seesawing price of oil has given consumers worldwide much to consider during 2008.

It is not helped by the fact that the local company with which we have a supply agreement employs a high-pressure salesman to answer the phone, quote the latest price per liter and coax customers into buying as many liters as possible.

His strong-arm tactics probably earn him an annual bonus which would not disgrace an oil company mogul.

What he knows is that those of us who use oil to heat and cook in the winter (I know, not desperately environmental, we have no mains gas supply but do have a solar panel and turn the oil off for six months each year) can imagine nothing worse than being stranded with an empty tank just as the extended family descends for the holidays and Jack Frost starts to tighten his wintry grip.

Desperate + gullible = ripped off. Game on, I thought last April. I cheated the man on the phone at the oil company of a few pounds in bonus by refusing to buy a full tank of oil at what I felt to be an inflated price of 51.5 pence per liter (around 65 euro-cents or US$1.03).

Instead I persuaded my skeptical wife to order a mere 500 liters, on the basis that this would be enough to last until nearly the end of the year, by which time (I said, crossing my fingers) crude prices would be way back down again from around $110 a barrel and heating oil would be way cheaper.

Over the summer, I chewed my nails as crude rose majestically to $147 a barrel, taking my wife's eyebrows up with it. I could see that I was going to be saddled with yet another financial clanger, my eternal optimism (see last week's blog) dragging the family budget and my personal credibility down with it.

But then my bet started to pay back. Crude prices slid and slid and slid, all the way down to around $40 a barrel.

I started to dream of a holiday in the sun on the basis of all the money we had saved by holding back on buying oil and waiting for the price to drop; after all, if the price drops 10 euro-cents, that's a saving of €250 on a full tank. If you go away to somewhere sunny, you're not even consuming any oil!

Then, out of the blue, my wife rang me at work. The oil in the tank was getting dangerously low and would only last another week.

It might run out just as... well, this is nearly the week before the holidays and you can guess the rest.

But luckily, she told me, she had spoken to the man at the oil supply company and he would fill our tank for 37.5 pence a liter. I sighed.

The connection between crude prices and the price of heating oil to consumer dorks like me is actually more tenuous and delayed than you'd think.

Even so, I valiantly weighed the odds. On the one hand, crude demand is falling, and will probably fall further as the global economy struggles to shake off recession next year.

On the other hand, petroleum prices have been underpinned by OPEC's determination to tighten supply; Saudi Arabia, the "swing producer" in the producer cartel and its biggest player, is already rumored to be cutting the amount of oil it exports.

In the end, the salesman won - more or less. My wife rang around, got a lower quote, called him back and got him to match it.

So next week the truck will roll up, the man will jump out and run out his hose to the green plastic thing, turn a switch - and we'll be warm and cosy over the holidays.

We'll also be £900, or $1,340, poorer off. So were we robbed? Should I have held on, maybe bought another 500 liters (at a slightly higher price; the salesman knows his job)? Or was I right to get my personal big oil deal out of the way before OPEC tightens demand? What do you think? How have changing oil prices had an impact on your life? Post your questions and comments below, and we'll put them to an expert on Friday's edition of Business International. (It's helpful if you also say where you are writing from.)  And here are some answers from Philip Sellwood, chief executive of the Energy Saving Trust 



soundoff (33 Responses)
  1. Art from Holland

    No oil here but natural gas, same thing; prices go up every half year. This January 16%, on top of that the "green "VAT so we would cut back on co2 emissions. We are installing a wood/coal stove again and burning everything that comes through the front door, no more natural gas for heating. We should never had them privatise the utility services, it's now way out of line.

    December 14, 2008 at 3:09 pm |
  2. Susan Bloomfield

    Not much. Husband is laid off until spring, so we don't have the driving issue and we heat and cook with wood and coal. Our coal is $100 a ton delivered.

    Right now our temps are -15 and we are warm. Couldn't afford propane if we had it.

    December 14, 2008 at 3:41 pm |
  3. Mats Genberg

    It used to be like that in our country too. A cold country where heating ia always a big topic. But today I never hear of anyone using fossile fuels anymore. Most people have changed their heating system to either biofuel or some sort of heatpump (Groundsource heatpumps or similar) so the dinner table topic is mor about WHAT system people have changed to, than oil-prices.

    /Mats Genberg – Sweden

    December 14, 2008 at 4:07 pm |
  4. Bill

    Have you ever considered ridding yourself of oil altogether and heating your home with wood? Nicely carbon emission neutral. I realize not everyone has their own forest plot as I do, but even so, a seasoned pile of wood that can stand up to a bitter winter is quite empowering. You can save more money depending on how much sweat equity you are willing to invest, an option you do not have with oil. It involves some manual labor, but can't most of us use some physical activity? There are modern wood boilers available in europe that will very efficiently provide all your heating and hot water. Cooking a little trickier, but a relatively modest energy need. Propane maybe?

    December 14, 2008 at 7:08 pm |
  5. vankirkc

    I don't believe that there is enough supply/demand flexibility to explain the price decreases we've been seeing in oil. Rather, oil and other commodities are being carried along on the global economy's roller coaster asset price ride. When things settle back down, probably in a year or two, oil and other tangible assets will return to something approaching normalcy. I believe normal for oil will be closer to $100 a barrel than $40.

    December 15, 2008 at 2:07 am |
  6. Username Exists

    Well, typing this with stiff fingers i have to realize: the gas price definitely has an influence on my life. Me and my 3 flatmates have decided not to heat our Berlin flat, because its simply too expensive. I'd rather wear a sweater and drink some hot cocoa. One of my mates furthermore says, that he isn't going to stuff any more money down Putin's throat. Well...kinda stupid, but that's how a lot of people feel here.

    As the Wu-Tang Clan said: Cash rules everything around me.

    December 15, 2008 at 11:01 am |
  7. jacob schønberg

    I hope the oil prices will soon go up again , because its the only way to teach people to save on it – its possible to build houses that use much less energy, and we should hurry to remove too bad houses and build the new kind with high efficiency ,- helped by high energy prices

    many greetings from Jacob Schønberg

    December 15, 2008 at 11:13 am |
  8. Laura, Geneva

    We have a house in alpine France, where oil heat still dominates (as far as I know), although some homes are heated by electricity and gas heat is becoming more common. When we bought the house, we had a new furnace installed–still uses oil but is programmable so we can adjust the usage according to our schedule and needs. We also have a tank that can accommodate about 4,000 liters.

    Just once, I would LOVE to be able to say "fill the tank" to our oil distributor–but cash flow issues affect oil flow no matter what the price of a barrel of crude. I have to order oil little by little based upon our usage and the price per liter. Today, however, I came as close to a fill as I ever did; I ordered 1000 liters for a price of 628 Euros. Last year a delivery of 500 liters cost about 500 Euros. Who knows what it will be in the next month or two? Lower? Higher? I too have to be an armchair economist to figure out "the perfect moment" to order based upon oil prices.

    Meanwhile, while I'm figuring out that perfect moment, the level in the tank gets lower and lower. Guess it really doesn't matter what the price is if the tank runs dry, the furnace stops working and the pipes freeze–

    December 15, 2008 at 11:35 am |
  9. Constantin

    YES INDEED !
    The EV1 had 100 miles range in 1998 The Volt will have just 40 miles in 2010.So the Volt has the BAD batery pack wich EV1 had in 1995 just to NOT BY THEM !!!
    SO NO ELECTRIC CARS NO BAIL OUT ! WE WANT GM TO PRODUCE CARS LIKE TOYOTA _RAV-EV ! wich by the way is on the roads today and WITH 100miles range battery pack !

    December 15, 2008 at 2:58 pm |
  10. Peter Jr Idoko

    I do think that his idea of buyin a very huge tank of oil isn't bad at all. I would do that . :)

    Muscat

    December 15, 2008 at 3:56 pm |
  11. Nam(South Korea)

    Hi, Charles.

    The cold winter come again.
    Nobody knows what oil price would be.
    But I want to the oil price go down.

    And a little bit waiting for....

    December 15, 2008 at 8:38 pm |
  12. Leo Hitchcock

    Now let me get this straight...the auto makers are trying to get money from us tax payers for their sob story...then they want to sell us their autos? Is it me but wont they then be getting paid twice?

    December 16, 2008 at 5:19 pm |
  13. David F

    Everyone is wondering what went wrong with the economy?

    Well, it's simple economics. How far can an economy thrive when most of the employed work in the tertiary sector. It's that simple.

    December 16, 2008 at 5:28 pm |
  14. john campbell

    Q of da week..........................
    What are my chances of securing a personal 'bail-out'???????
    The "American casino of a financial system" has affected Thailand too. I am an Aussie working in BKK but most of the jobs have dried-up and i haven't had paid work for 2 months......True to 'form', late payments of rent here attract fines of 100baht a day...extra....
    So, for the ones struggling, "let's charge 'em more!!!!!"

    December 16, 2008 at 6:03 pm |
  15. mike

    we all see these bailouts,,well here is something that will turn youre heads,,there is 3,000,000 americans in this county,if the goverment gave $500,000.00 to every american over 18 to pay off all thier debts house,credit cards,loans,ect,,that would boost our economy beyond belief,and what would this cost the goverment(in all reality,us,couse its our social security money being used for these bail outs)ready,,check it out,,$700,000,000.00,,isnt that something,,would be the same that we are using to bail out all these companies that used thier crooked means to screw us to begin with,,wake up america,,call in and voice youre self,,another thing,,o.p.e.c meets tomorrow,,wanting to raise oil couse they arent making enough money,,lol,,to funny,,isnt this one of the things that started this economic slide was the price of oil??,,just keep driving the smaller more fuel efficiant cars and park those v8`s,,if we dont buy it,,they cant sell it,,then it has to decline in price,,fight back,,dont let other poeple determin youre fait,,show them we dont have to stand for it anymore,,mike

    December 16, 2008 at 10:10 pm |
  16. J RuizA

    Interestingly novelled story. I suggest you draw two lines connecting the price of crude oil of: july 07, dec. 07, jul 08 and dec. 08.
    Then do the same for the price of your fuel and we can check the lag and or the exagerated margin that suppliers and distributors take.
    Oil processing is and old industry and thus, margins should never change.
    If you are fed up, change fuel for Vodka!

    Jay Are lives in Mexico City, works Public Affairs.

    December 17, 2008 at 5:02 pm |
  17. GUY Clifton Park NY

    THE PRICE OF CRUDE HAS GONE DOWN ABOUT 70% AND I'M STILL PAYING $3.30 FOR KEROSENE. THE DEALER TELLS ME HE'S MAKING THE SAME "MARK-UP" AS LAST YEAR AND THE PRICE GAUGING IS BEING DONE BY THE PEOPLE HE BUYS FROM. CAN'T ANYBODY DO SOMETHING ABOUT THIS?

    December 17, 2008 at 5:39 pm |
  18. Rezzak

    Hi, Charles.

    Here in Bangladesh the winter come again.

    But the transportation cost is not dropping again.

    i think if the price fall will not help at all to us.

    Lets wait and see.

    its rezzak

    December 17, 2008 at 5:40 pm |
  19. Luz Diaz

    Although I live in a tropical island, Puerto Rico and we do not have
    the expenses that a house covers to keep it warm....we do cover expenses to keep our dwellings "cool" –and so our power bill goes up. We saw some increase in our power bill a short time ago, but lately it has returned to some lower bills. Being a senior citiizen,
    there are times when I must pay taxi to doctors appointments and I see the expenses for that go up and down ......So, yes, I believe every human being directly or indirectly feels the effects of oil prices
    changes....We need to be conservative, realistic and make adjustments and keep our fingers crossed that better days will come up!

    December 17, 2008 at 5:43 pm |
  20. Luz Diaz

    Although I live in a tropical island, Puerto Rico and we do not have
    the expenses that a house covers to keep it warm....we do cover expenses to keep our dwellings "cool" –and so our power bill goes up. We saw some increase in our power bill a short time ago, but lately it has returned to some lower bills.
    Being a senior citiizen,there are times when I must pay taxi to doctors appointments and I see the expenses for that go up and down ......So, yes, I believe every human being directly or indirectly feels the effects of oil prices changes.

    We need to be conservative, realistic , make adjustments and keep our fingers crossed that better days will come up!!

    December 17, 2008 at 5:50 pm |
  21. Jim Mc

    You delayed purchasing 2,000 litres and got them more than 17 pence a litre cheaper . Stop thinking glass half empty and you could have saved more . Your action actually netted a saving of 340 pounds!

    As a Brit abroad I do have some sympathy though and think you should consider the culprit on Oil prices . Here in the US I've recently seen petrol at the equivalent of 42 cents a litre (about 28 pence) . The difference to the UK is all tax ! I suspect your oil and all other fuel in some form suffers the same burden and the question should be directed at the cause – who the Brits elect !

    December 17, 2008 at 6:20 pm |
  22. Tim R

    Oil companies, like any business, will charge whatever they can in order to maximize their short and long term profit. Taking a look at the lag between crude and gasoline prices and the earnings of Big Oil during that time is clear evidence of that. Given a constant supply, only until sales slacken are they forced to reduce their prices to stimulate demand. Out of that, we take a lesson and if we want to maintain cheaper gas prices, we've got to make it more profitable for the oil companies to keep prices down. That means that when prices start rising again, we as consumers need to demonstrate price elasticity and reduce our demand for oil, by i.e. carpooling, putting on a sweater, etc.

    On another point... Are the banks soley to blame for the recession? I would lay part of the blame on the oil supply chain for spiking prices. Sure, increased demand and reduced supply was partly to blame, but these were also invariably scapegoats in the effort to conceal flagrant profiteering. The problem is that now, because of their greed, they contributed to a general slowdown and are reeping their just rewards as the economy contracts and demand eases off.

    December 17, 2008 at 7:58 pm |
  23. Richard West

    Hello Charles,
    Crude is going to 30 bucks. So this time you should have stuck with it.
    Upside is you don't have to agonise any more.
    Cheers

    December 17, 2008 at 10:37 pm |
  24. Wicho

    I see oil producers have to learn something from the actual situation. They have had an easy job up today taking two decisions: produce or not produce. That has been enough for managing the price. But this time is different. They will have to really manage the situation to find out ways to convince the end client (us) that there is a beneffit about consuming their products (marketing). They have been so confident about the huge amounts of money in their pockets that they forgot that they depend on their clients to survive. Cutting the production did not work this time.
    Every one of us is looking about saving energy, even the prices are still lowering. Energy saving cars are now one of the main issues under discussion.

    December 17, 2008 at 11:22 pm |
  25. Oscar López

    The flow of recreational car traffic, here in our beautiful river valley an hour from Santiago de Chile, has increased substantially after the recent fall in oil prices. So now our tourism business is booming!

    Long live the financial crisis!!!

    December 18, 2008 at 3:24 am |
  26. roline melgar

    thank god we dont have winter

    December 18, 2008 at 6:40 am |
  27. Lebohang Polinyane

    Here in Gaborone, Botswana our price of petrol declined to 4.94 pula per litre (under 50 pence) from an all time high of 9.94 pula per litre (under £1). However, local supermarkets have not extended the 50% drop in petrol to basic food that we desperatley need. No chain supermarket has slashed their prices by up to 50% but by a mere 10-15%!!!

    December 18, 2008 at 7:43 am |
  28. Onno Frowein

    We do as if this is the first energy crisis but we have had others before. It's about 30 years ago that fuel was in short supply and home heating fuels prices went through the roof at that time. Still no comparison to the present prices and filling your 1000 gallon tank requires now almost a second mortgage. Living in a wooded area in Connecticut I bought a woodstove which warmed up the house I also installed a heatpump with all the promises that made sense but never materialized. It does a nice job in pre-heating the water for the boiler but not to heat the house.
    Since everybody else also tried to cut back on their heating costs also bought a woodstove. Then the state wanted to abolish woodstoves because they polluted the environment. Although coal is a cheaper alternative to oil but then again they also pollute the environment. A windmill or solar panels on your roof also may offer theoretically a clean alternative, but under Murphy's law when you need it the most there is no wind or no sun.
    So one way or the other you are stuck to oil or move South..

    December 18, 2008 at 7:48 am |
  29. S.PURUSHOTHAMAN

    Hodson was lucky.In India the government not the oil company fix the price. We do have a welfare government.But we dont know whose welfare the government considers most important; the oil companies or the guillible citizen like me. At USD 147 a barrel we paid Rs.55/- per litre of petrol. Now at 40$ we pay Rs.50/- per litre of petrol. I just forgot the mathematics! Will you come to my rescue?
    S.PURUSHOTHAMAN
    INDIA

    December 18, 2008 at 11:43 am |
  30. AKKI

    Although the crude price is now at $40 per barrel and inflation is going down, it hasn't made a big difference in the family budget of middle class people. Many people think that cuarrent economic slowdown will take atleast 2 years to bring the world economy back on track. But one must not ignore the fact that the crude price will again reach to $150 a barrel or more than that once the economy will bounce back.

    AKKI – INDIA

    December 18, 2008 at 3:13 pm |
  31. Dave Casey

    As new englander, we feel the crunch. From individual to business, user to producer we as humans have learned to addapt. Hopefully the lessons become habit. and we learn to conserve on a daily basis. It shows that the consumer has the power to push business in a position where we can co-exist and not be rack over the coals, but he gap of haves-and – havnots has widened. As a Baby boomer this crisis is just plan "bad luck"

    December 18, 2008 at 4:46 pm |
  32. Mark M.

    I am an American Osage Indian living in France on retirement. My retirement is financed by the tribal shared resources of our oil income. The plummeting prices are disastrous for all of us and I especially feel it – the low prices combined with the cost of living in France is wreaking havoc on my budget. Thank heaven my wife is a retired French civil servant, a system with its own inbuilt safeguards, or we might very well find ourselves on the street at our age. Let oil go sky-high, let people pay for their petrol dependancy, it helps us live above the poverty line.

    December 18, 2008 at 7:28 pm |
  33. S.Perera

    In Sri Lanka we really havent got any advantage closer to the reduction of the oil prices in the market due to the government taxes. Oil prices were at a high at Rs.157 per litre ($1.50 per litre) just a month ago and now it is just Rs.122 per litre ($1.20 per litre). We are unfortunate not to get the benefits of the reduced oil prices just because the present government is lacking of bright economic plans and is deficient of intelligent personel that their worst blunders are made into the plight of the general public. How sad is that?

    December 18, 2008 at 7:59 pm |

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