For the first time in recent memory, historically high prices for heating oil have retreated in the Interior. And they haven’t just retreated, they’ve come down to a level at which the cost of delivered fuel is competitive — cheaper, in some cases — than the cost of delivered wood on a per-BTU basis. To Interior residents shell-shocked after years searching for respite from high heating costs, it’s a through-the-looking-glass scenario. And cheaper oil stands to upend many aspects of the Interior energy paradigm.
In past years — even last winter, when slumping oil prices coincided with relatively mild temperatures — the heating options available to Interior residents seemed fixed in their price hierarchy: heating oil was abundant but expensive, wood was cheap but energy-intensive to gather and burns dirtier, and natural gas was potentially cheap but frustratingly elusive for most residents. That’s the reality that led to the Interior Energy Project and the goal of low-cost natural gas that would ease residents’ heating costs.
As the state and its residents have learned during the past year, however, the price of fuel commodities is volatile. In late 2014, the price of oil collapsed by roughly half, throwing the state’s oil-dependent economy into turmoil. That has meant budget shortfalls, painful cuts and — for the first time in several years — costs for heating oil that aren’t nearly as burdensome as before. In fall 2012, heating oil prices were above $4 per gallon. In 2013, they stood at $3.70. A year ago, they were in a similar range, close to $4 per gallon. This year, as the first winter snowflakes fell in the Fairbanks area, the cost of delivered heating oil was $2.47 — a decrease of almost 40 percent since a year ago.
The benefit this winter for area residents will be considerable. According to state Department of Labor figures, the average Interior household spent $388 per month on heating oil to heat their home when prices were at $4 per gallon. That means that if prices remain relatively steady this winter, the average homeowner will save more than $100 per month on fuel. That money can be used for groceries, other consumer goods, or even to help weatherize homes or make them more energy efficient, turning the savings into a gift that keeps on giving.
But there’s a flip side of the coin, too. The Interior Energy Project’s goal is to bring natural gas to residents at $15 per thousand cubic feet of natural gas, the energy equivalent of $2 per gallon for heating oil. While residents will likely still be keen to switch over to natural gas when it arrives if it means saving only $0.50 per gallon instead of $2.00 per gallon, they may do so more slowly or in smaller numbers. That’s bad news for the energy project, which relies on a strong adoption rate to ensure the $15 per mcf price point is feasible. It could also be bad news for the political future of the project, as legislators may attempt to claw back money already allocated to the natural gas goal since Interior residents’ energy costs, at least for the moment, aren’t as severe as before.
Whether residents, legislators or anyone in between, what’s important for all those dealing with Interior energy issues to remember is that today’s heating price paradigm doesn’t predict anything about next year or the more distant future. Heating oil is cheap now, but it could easily be expensive a year from now. Interior residents would be wise to maintain focus on the Interior Energy Project, as heating costs that can be stabilized at the project’s goal would give residents price security for years to come. So far this fall, it’s looking like the Interior could get a reprieve on high heating costs for the winter — but, like the weather, that can change in a hurry.
— Fairbanks Daily News-Miner,