Consumers, some Maine oil companies shifting toward alternative fuels
YARMOUTH — On a cold day in early November, employees of Downeast Energy arrived at a home in Yarmouth for an appointment.
They didn't drive an oil truck, or come to refill a propane tank.
Instead, they closed all the windows and doors and set up a fan powerful enough to suck outside air in through cracks and poorly insulated walls. A thermal camera revealed where the leaks were so the homeowner could prioritize her efficiency improvements.
Weatherization and thermal imaging consultations are just one example of how Brunswick-based Downeast Energy and other oil companies are adapting to changes in the marketplace.
While still the No. 1 fuel in the state, the percentage of Mainers who heat their homes with heating oil is down about 5 percent from 2004, according to the Governor's Office of Energy Independence and Security.
As more Mainers choose alternative fuels like wood pellets, propane or natural gas, oil companies are looking elsewhere, too.
“Nothing stays the same forever," said Mike McCormack, vice president of energy at Downeast. "We don't look at (the decreasing consumption of heating oil) as the black hole of our future. We embrace that."
Even though Downeast now offers solar power, bio-fuels and propane, heating oil still makes up a significant portion of its business. That makes sense for an energy company in the state with the highest percentage of homes heated by oil – 75 percent.
Why do so many Mainers heat with oil?
Jamie Py, president of the Maine Energy Marketers Association, said the fuel is easy to use, reliable and safe. And, unlike natural gas, customers can shop around to find the lowest price.
"Historically it's been a great value," Py said. "That's why its been so popular in a cold climate."
Py said in the past, alternative fuels were either too time consuming, like chopping wood, or too pricey; natural gas was more expensive than oil for 25 out of last 32 years, he said.
But that's starting to change as the cost of alternative fuels has dropped, and the price of oil has skyrocketed. This winter, industry analysts are predicting the highest price ever. As of Oct. 31, the average price was $3.56 per gallon, an increase of 5 cents over last week.
The prices aren't just high, they fluctuate dramatically, something that Jeffrey Marks, deputy director of the Office of Energy Independence, cited as a reason more Mainers are switching away from oil.
"As consumers become more aware of alternative heating options, and as petroleum prices continue to experience volatility, consumers will be educated and motivated to increasingly seek other ways to heat their homes, including wood and natural gas," Marks said in an email.
Dealing with decreased consumption
Area oil companies are coping with the shift away from their core product in different ways.
Not every company has the resources of Downeast, to offer multiple alternative fuels. Some are focusing on one or two.
Mike Feenstra, owner of South Portland-based Our Oil, decided to sell wood pellets after noticing that many of his customers aren't getting rid of their oil furnaces, but are adding pellet stoves to help cut costs and use less heating oil. He has been thinking of selling coal, too, which he said is cleaner and more efficient than it used to be.
But Feenstra is also relying on a niche to carry his oil business: customers in the Low Income Energy Assistance Program and municipalities.
“We're one of the few companies that will go out and do a 25-gallon or 50-gallon drop" without charging extra for the small amount of fuel being delivered, he said. Most other oil companies charge a fee for anything less than 100 gallons.
"We do a lot of general assistance to the towns," he said. "We're there for the people."
Some other oil companies aren't adding any new products. Instead, they're trying to win customers the old-fashioned way: by under-cutting their competition.
Dale Brown, owner of Richmond-based Dale's Cash Fuel, which delivers in the greater Portland area, said he has definitely noticed that his customers are switching to alternative fuels, and he doesn't blame them. In fact, he heats his home with propane, he said, "because it's cheaper."
But as the only employee of his company – he answers the phone, drives the truck, pumps the oil and does the accounting – he's not in a position to offer his customers anything else.
Instead, he thinks his one-man company works to his advantage by allowing him to sell oil more inexpensively than larger companies with more overhead. For example, Dale's Cash Fuel was selling heating oil for $3.39 on Oct. 31, while Dead River Co., one of the largest in the region, charged $3.60 on Nov. 1.
"I can sell fuel cheaper than a lot of people because it's just me and a truck," Brown said.
But unlike Dead River, Brown doesn't offer pre-payment plans, emergency delivery, boiler service or lines of credit. He's cash only, and delivers only if the drop is arranged in advance.
"I'm as small scale as you can get because I haven't invested in a bulk plant and all these things," he said. "That's why I can sell my oil cheaper than anyone else."
As a one-man operation, it may seem that Brown is vulnerable to the ups and downs of the price of heating oil, as well as any circumstances that could interfere with his ability to deliver oil.
But he's not nearly as vulnerable as mid-sized oil companies with more staff, infrastructure and equipment, Py said.
"The one-, two-truck operators are the most flexible and have the lowest overhead," Py said. "They may have some difficulties, but really it's the mid-level companies that have a lot of overhead they have to carry."
He pointed to last January's sudden collapse of Brunswick-based Thibeault Energy as an example.
It's still unclear what contributed to Thibeault's demise, but owners of other oil companies speculated that Thibeault may have been struggling to pay off its new oil terminal, constructed in 2003, or incorrectly guessed the price of oil and been forced to buy it at a higher price than what was offered to customers in pre-paid contracts.
"If you're a company and you're guessing on what your commodity costs will be ... that's a bad place to be," Py said.
From oil to 'energy'
Perhaps the clearest indication of how oil companies are adapting to the change in the market may be the way Maine Energy Marketers Association, a trade group for fuel companies, has rebranded itself.
Two years ago, the organization changed its name from Maine Oil Dealers Association, "to reflect the business practices of our existing membership, which included providing other products besides oil," Py said.
"While the branding was good, the reality was the members were not just doing that anymore," he said.
Downeast Energy recently announced a new partnership with ReVision Energy, a solar panel manufacturer, which will help to further its identity as an energy company, not just an oil company.
“We're not fighting the tide," McCormack said. "... We need to find out what people will be buying for energy, and adapt and change."