Since 1999 we've achieved discounts of up to 50� a gallon on oil and kerosene, and from 50� to $1.00 on propane with the exception of 2006 where again we offered excellent discounts on propane, but for the first time since 1999 our oil savings were much less significant due to the El Nino.

In 2007-2008, our lowest price for oil, $2.38/gallon was $2.50 below the high cash/market price in February, 2008. Our lowest propane price, $1.74/gallon was over $2.50 below market prices.

What's Happening in 2008-2009??

We had planned on going to bid in late February. However, we woke up one morning in early February to find that Exxon had frozen $12 billion of Venezuela's assets in court and Venezuela had reacted predictably by threatening to cancel oil shipments to the US. The price shot up 50 cents per gallon and never came down again.

There are several problems; this country's enormous debt, the subprime crisis, lowering of interest rates by the Federal Reserve Bank and the unrestrained printing of money have devalued the value of the dollar substantially. Since oil is pegged to the dollar, this has helped run up the price of oil. Another problem is speculation. There is no question that crude oil is overpriced. In the commodities market, money is chasing money. The question is how much? Hedge fund operators like George Soros have testified to Congress that they see a possible "bubble in the commodities market. . The question is if and when it will break. A final piece of the puzzle is the fact that Lehman Bros has predicted that about 2 million barrels a day of new oil will hit the market early next year.  So, there is a good chance that oil prices will actually decline in late 2008 or early 2009. See this article written for laymen: http://www.pittsburghlive.com/x/pittsburghtrib/s_569868.html OR

http://money.cnn.com/2008/05/30/news/economy/oil_cftc/?postversion=2008053110 OR

http://www.otchoice.com/here_comes_the_oil_bust.htm

To see for yourself some articles about the commodity "bubble", copy and paste those two words in Google and look at the results or click on commodity bubble.

June 10th, 2008 Update:

Many dealers have now come out with pre-buys in the $4.50/gal to $4.90/gal range. We still feel that oil is overpriced and that a substantial drop will occur this fall sometime. We sent the Survey below to 400 members on Tuesday.

Dear Our Town Members,

For nine years we�ve always secured fixed price offers for you. Usually, we�ve secured our prices long before now. But I�m sure you know that the energy market is crazy right now. We hear it every day on the news. We here at OTEA are concerned that this may be a price �bubble� that will break.

 This is the first year we are leaning towards �rack plus�, the approach usually reserved for commercial establishments. It means that you pay market wholesale price for the day you buy your fuel plus an administrative margin for that dealer that OTEA has agreed to. Prices will fluctuate daily. With �rack plus�, if prices go down as they did due to the El Nino in 2006, you save money. If they go up, it costs you more.  However, Fixed Price programs have a downside also. If you lock for the heating season price  you�re obligated to purchase that fuel at that same price even if market price go down.

We are conducting a survey of a small  group of our members. Based on what you know now, which of the following programs would you choose for this season.

Pre Buy

Pre Buy with 40� CAP (price protection) if available

Fixed price Net 30 (Required to purchase fuel ordered)

 Fixed Price Budget

Fixed Price Budget with 40� CAP (price protection) if available

 Rack Plus (What is It??)

Apparently, a lot of our members agree with our opinion of the market: The results of our Survey above:  65% chose "Rack Plus", 16% chose Fixed Price Net 30, 8% chose Fixed Price Net 30 with a 40� CAP (if available) and Pre-buy & Fixed Price Budget split 10%.

Based on the survey, we have decided to split our bid offer this year. First go round would be Propane pricing including the Net 30 program and an offer to sign up for "rack plus" for oil & K1. the second go round for Pre-buy and fixed pricing for oil & K1 would happen when and if prices warrant.

More Information on "Rack Plus"; Definition & Resources

Research Sources:

What Is an El Nino??http://www.pmel.noaa.gov/tao/elnino/nino-home.html

Picture of the Jetstream: http://www.pmel.noaa.gov/tao/elnino/report/figure19.html

First  El Nino Release 9/13/06: http://www.noaanews.noaa.gov/stories2006/s2699.htm

NOAA predicts mild winter: http://www.noaanews.noaa.gov/stories2006/s2716.htm

El Nino kills hurricanes Nov '06 http://www.noaanews.noaa.gov/stories2006/s2748.htm .

By the way, “Energy Basics” by the US DOE is a great site for a child doing a paper on energy. It’s all there.