Should I buy heating oil in August?

You may be wondering who gets that “extra” money; it’s probably not the oil dealer who sends you the bill. Many dealers have given up offering fixed-price contracts before the season begins. Those who do are most likely buying their own futures contracts to lay off the risk on someone else. Chances are, your dealer will hedge his contract with you before the first frost. (If you’re curious, just ask.)

Heating oil prices may well drop again from current levels — or they may go higher. If you can’t afford the cost of a big price spike, taking out a little “price insurance” today isn’t such a bad idea.

For years, diesel was the stinky, bottom of the storage tank, left-over dregs, that fueled our semis and buses across the country. When the Big Three auto makers started making pickups with good quality diesel engines in them, the price of diesel jumped by leaps and bounds to surpass the price of gas. Why?! Diesel is still easier and cheaper to make than gas, yet the price has remained way beyond the price of gas.
— William F. Pawnee, Ill.

Let me stop you at “the stinky, bottom of the storage tank, left-over dregs.”

While that may have been true in the good old days, as of last June refiners were required to make (and new diesel engines have to run on) what’s call Ultra Low Sulfur Diesel. That old diesel did more than stink: It had an unacceptable level of what are called particulates. Because it was not refined as purely as gasoline, those impurities went out the tailpipe into the atmosphere and eventually settled in people’s lungs.

The transition to these new standards took years — and billions of dollars in refinery upgrades. Some refiners made the business decision that the cost of upgrading was too great to justify. (Or, as many readers believe, they conspired to shut down capacity as part of a national price gouging conspiracy — take your pick.) So we now have cleaner diesel, but it’s no longer the poor stepchild of the refining process.

There’s another reason gasoline and diesel don’t march to exactly the same drummer. Refined motor fuels — while mostly produced as close to market as practical — are still a global commodity. About 10 percent of the gasoline sold in the U.S. is imported. In this country, overall consumption skews toward gasoline; relatively few passenger cars here use diesel.

In Europe, the reverse is true, and the high-mileage diesel fleet is growing. That has produced increased demand globally for diesel (along with the agricultural and construction industry demands of developing countries.) So what used to be a relative “surplus” of diesel in the U.S. has now been eliminated by foreign demand.

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