You’ve probably seen the articles on the economic damage wrought in New England by a winter that, thus far, more closely resembles spring: 60-degree temperatures on Christmas Day in Boston, blooming forsythias in Fairfield County, forlorn lifts at Vermont ski resorts, ponds in Maine that won’t freeze over for skating.
But even as it delivers pain to seasonal businesses, the unseasonably warm winter is delivering a rolling, wicked awesome stimulus to Red Sox Nation that could well outweigh the lost ski business in Stowe and Stratton. And it all has to do with one of the oddities that makes the states east of the Hudson River unique.
Unlike their compatriots in the rest of the country, many New Englanders rely on heating oil to keep their homes warm during the cold winter. As the Energy Information Administration notes (see table WF 01), Americans in other regions rely overwhelmingly on electricity or natural gas for heat. But in the Northeast (New England plus New Jersey, New York, and Pennsylvania), about 5 million households, or about 20 percent, use heating oil. What’s more, as this article in Commonwealth notes, “the percentage of households heating with oil is 64.2 in Maine, 46.1 in New Hampshire, 43.8 in Vermont, 43.7 in Connecticut, 32.6 in Rhode Island, and 29.2 in Massachusetts.”
The households burning oil in New England include mine. Each fall, as the leaves turn, delivery trucks start to ply the winding lanes and pump their precious cargo into a 250-gallon tank in the basement. In January and February, the trucks show up once every few weeks. It takes about 1,600 gallons of heating oil annually to keep our home—a moderately sized, older house in lower Fairfield County, Connecticut—at a comfortable temperature. In years when cold weather coincides with expensive oil, it can add up to close to $6,000. (I shudder to think of the bills my McMansion-dwelling neighbors pay.)
The oil companies take the sting out of the cost through monthly level billing payments. Last year, we made 10 monthly payments of about $530. But this year, the monthly billing plan is much lower—about $270 per month. That’s largely because the fuel company knew going into this season that the price of heating oil has fallen. (This 10-year chart shows that the price, which closely tracks that of crude oil, has fallen by nearly two-thirds from its 2014 peak.) As the Energy Information Administration notes in this forecast, nationwide heating oil averaged $3.88 per gallon in the 2013-14 season, fell 22 percent to $3.04 per gallon in the 2014-15 heating season, and is expected to be about $2.40 a gallon this heating season—a 62 percent decline from two years ago.
But my savings will likely be greater than that. Typically, the heating oil company presumes that the volume of purchases will stay steady from year to year. But given the tropical November and December we’ve endured, it’s likely we’ll use much less heating oil this year than last year. The EIA forecast that the typical U.S. household will consume 533 gallons of heating oil, down from 609 last year, a decline of 12 percent. So if you presume a 12 percent decline in volume from last year, and a 21 percent decline in price from last year, that’s a savings of 30 percent on last year. (In its December winter fuels outlook, the EIA assumes as a base that that spending on heating oil will fall 25 percent this year.) That’s massive. A household that spends $3,000 per year on heating oil will save $900 this year; if you spend $6,000 last year, you’ll save about $1,800 this year.
That’s real money. In fact, these savings dwarf those reaped by the typical driver thanks to lower gasoline prices. “The average U.S. household expenditure on motor gasoline in 2015 is expected to be about $1,817, the lowest level in more than a decade,” the EIA estimate. “This level is about $700 less than average household gasoline expenditures in 2014.”
But we shouldn’t expect taciturn New Englanders to gloat about their good fortune, or to lord it over their regional rivals. People tend to feel the pain of rising fuel prices much more acutely than they feel the joy of lower fuel prices. And the good economic news will take hold in January and February, months in which New Englanders are coping with seasonal affective disorder. So we shouldn’t expect an orgy of spending at the outlet malls in Freeport, Maine, or that the burghers of small Vermont towns will start splurging on Teslas. Rather, I’ll look for my regional neighbors to pay down a little more debt and a save a little more. This is, after all, the land of steady habits.