Fuel Oil Dealers

SIC 5983

Industry report:

This classification covers companies primarily retailing fuel oil. Companies that primarily sell fuel oil burners are in SIC 5074: Plumbing and Heating Equipment and Supplies (Hydronics); those that install and service fuel oil burners are in SIC 1711: Plumbing, Heating and Air-Conditioning; and those that repair and service fuel oil burners are in SIC 7699: Repair Shops and Related Services, Not Elsewhere Classified.

By the mid-2000s, heating oil companies across the country were consolidating in what Fuel Oil News called an "acquisition derby." In 2004, many were offered for sale due to financial reasons, whether because of instability or the relatively high asking prices allowed, but many others were closing due to reasons such as aging employees.

Approximately 5,670 establishments were doing business under this industrial classification in 2008. Companies in this industry sell motor oil for vehicles and fuel oil for heating buildings, with the largest earnings coming from heating oil sales. Residential customers are the primary consumers of heating oil. In 2002 the Energy Information Administration (EIA) reported that 8.1 million American homes use heating oil each year to heat their homes, and that nearly 80 percent of those households are in the Northeast. Schools, hospitals, businesses, and industry account for the bulk of non-residential heating oil sales.

Based on data published by Dun & Bradstreet, the total number of establishments fell slightly from 5,670 in 2008 to 5,398 in 2009 with industry-wide employment of 43,301 workers. In 2009, New York led the nation with 886 establishments and more than $2.6 billion in sales. Massachusetts came in second with 719 establishments and over $1 billion in sales. Pennsylvania captured third place with 574 establishments with sales also over $1 billion. Other major contenders were Virginia, New Jersey, and Connecticut.

Industry sales of heating oil vary with the season and geographic market. Demand is normally higher in northern states during the winter, causing oil prices to rise. But price is also affected by regional climatic changes. To provide a reserve of heating oil, the Northeast Home Heating Oil Reserve was established in July 2000 by President Bill Clinton. This allows a reserve of 2 million barrels to be maintained in the Northeast. In the fairly typical winter of 1996 the average price of heating oil reached $1.14 per gallon. But two unseasonably warm winters caused a 34-cent per gallon dip in price. By February 1999 heating oil prices had fallen to 66 cents per gallon. By comparison, home heating oil prices were at all-time highs of nearly $3.40 per gallon in February 2008, an increase of nearly $1 over the previous year.

Fuel oil dealers can also be affected by international conflict and domestic politics. The 1970s energy crisis inflated the price of crude oil, which sets the pace for heating and motor oil prices, and reduced profitability for gasoline and fuel oil dealers. Gasoline prices peaked again in January 1981 shortly before the Iran-Iraq oil embargo. Oil prices collapsed in 1985 and 1986, when Saudi Arabia and Kuwait launched an oil price war in OPEC. In 1993 the industry successfully launched a campaign against President Bill Clinton's proposed 60 cents BTU (British Thermal Unit) tax on heating oil. The tax was eventually lowered to the same level as tax increases on other forms of energy. Both motor and heating oil prices have been affected by the ongoing crisis between the U.S. and Iraq. Dating back to the 1991 Persian Gulf War, fuel oil prices have ebbed and flowed with tensions in the Middle East. In November 1999 Iraq suspended exports, forcing crude oil to its highest level since Operation Desert Storm.

Current Conditions

Crude oil prices skyrocketed, as did the cost of fuel oil for residential heating from $1,962 in 2007, up to a projected $2,593 for 2008, according to the National Energy Assistance Directors' Association. More than 963,000 homes in Massachusetts are served by over 800 fuel oil dealers. In Maine, four out of five homes are heated by oil.

Senator John Kerry of Massachusetts along with Senator Olympia Snowe of Maine were bracing for the worst possible case scenario if fuel oil customers could not afford to heat their homes in the ongoing stagnant economy. Therefore, Kerry and Snowe were pushing for legislation that would allow heating oil from the Northeast Heating Oil Reserve put in place in July of 2000 to become available if home heating oil rises above $4 per gallon during the winter months of 2009.

Rising crude oil prices and fuel oil translated into hardship for smaller fuel oil dealers who were "feeling squeezed" as some customers were unable to pay for the fuel oil altogether or they were slow in paying, which in turn dealers were unable to pay their suppliers. This ripple effect had an immense impact on the industry as a whole. Because of price of crude oil was so volatile, many fuel oil dealers throughout Massachusetts, Connecticut, and Vermont were no longer offering customers to pay up front for their heating oil to lock in the price for their season total. In 2008, "pre-season prices reaching all-time highs, dealers and customers rushed to lock in prices for fear of an upward spiral, only to see prices crash as the heating season began, leaving them to pay a dollar or more per gallon over the market price for much of the winter," Edwards wrote in the Rutland Herald in September of 2010.

According to the EIA, residential heating oil prices for the Northeast will rise in small increments to just over $3.10 per gallon during the winter of 2010 before trending back down towards spring. The chief economist for Deutsche Bank AG in Washington, Adam Sieminski, consulting firm, PFC Energy, and Energy Analysis all "point to a welcome and well-timed fall in crude oil prices this year that will also make for cheaper refined products, like heating oil, for the rest of the year." cited from Heating Oil.comin June 2010.

As the end of the decade nears, fuel oil dealers were getting a boost from President Barack Obama who referred to heating oil as "the key to America's future." The President promised to bring fuel oil to an additional 10 million U.S. homes by 2014. In fact, to solidify his position of the seriousness of this matter the White House was undergoing installation of a 1,000 gallon home heating oil tank that would replace the rose garden.

Three of the largest heating oil distributors in the late 2000s were Star Gas Partners L.P., of Stamford, Connecticut; Farm & Home Oil from Telford, Pennsylvania; and Leffler Energy, of Mount Joy, Pennsylvania. Star Gas is widely considered the largest heating oil distributor in the United States, with more than 415,000 customers in the Northeast and Mid-Atlantic states, and $1.27 billion in sales in 2007. Petro Holdings is a subsidiary of Star Gas; in 2007, Star Gas acquired another seven retail heating oil dealers, adding another nearly 20,000 customers. Farm & Home serves the Pennsylvania market and had fiscal year 2007 sales of $702 million. It was purchased by Buckeye Partners, L.P. in February 2008.

Based in Pennsylvania, Leffler Energy serves the Mid-Atlantic states of Pennsylvania, Maryland, New Jersey, and Delaware. Leffler Energy, a subsidiary of Meenan Oil, was formed in 2003 with the merger of SICO and Leffler. Its estimated 2007 sales were $361.2 million.

Star Gas Partners L.P. reported revenues of $1.54 billion in 2008 before falling slightly to $1.20 billion in 2009 with 2,655 workers. Star Gas, through its subsidiaries Petro (Petroleum Heat and Power Inc.), Meenan, and Leffler Energy acquired Champion Energy Corporation along with their more than 145,000 residential and commercial customers in May 2010.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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