McClaughry: Watch out for a heating oil crunch

By John McClaughry

Gov. Phil Scott’s veto of the Vermont Climate Council’s urgently desired tax on heating oil for homes, businesses, churches, schools and government buildings stopped that plan dead in its tracks. That’s the good news.

The bad news is that the governor and the Democratic leadership will try to find common ground to enact the vetoed Clean Heat Standard in 2023, to be put into effect in 2024.

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute.

But right now Vermonters face a pressing problem: steadily rising gasoline, diesel and heating fuel prices.

Sixty percent of Vermont’s homes depend on oil heat. Over the past eight months heating oil prices, like gasoline and diesel prices at the pump, have marched steadily upward. At the beginning of last year’s heating season (10/4/21), the average retail price was $3.002/gallon. At the end of the season (3/28/22) it had risen to $5.052/gal.

Many variable factors will determine the heating oil price next January. The war in Ukraine is causing a massive and unpredictable restructuring of global petroleum supply chains. Europe is bidding up fuel prices to replace Russian oil and gas imports.

The New England power grid may need to commandeer heating oil to power the grid if natural gas supplies aren’t enough to meet New England demand. A key unknown is the depth and duration of the next northern hemisphere winter.

Then there’s the refining problem. Jim Geraghty of National Review reports that “we’re getting back to pre-pandemic levels of demand, while our refineries are pumping out about a million fewer gallons of fuel per day than they did before the pandemic.” Six U.S. refineries have been shut down in recent years, a seventh is in the process, and only one new refinery has been built since 1977.

Geraghty observes that “successive administrations and the cultural zeitgeist made it clear to the oil industry that their product did not have a future – and so the oil companies reduced their investments at all stages of seeking out, drilling, obtaining, and refining their product.”

Two oil industry analysts in the Wall Street Journal write “Devon Energy obviously believes it’s better to return capital to its shareholders than to reinvest in the business. The reason is the left’s incessant demonizing of the fossil-fuel industry, leading to near pariah status, which has succeeded in driving capital away from the industry.”

In a May 23 interview in Japan, President Biden said he is encouraged by the rising petroleum prices. “when it comes to gas prices, we’re going through an incredible transition that is taking place, God willing. When it’s over we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over.”

American homeowners will not be reassured by this when the truck arrives with heating oil at $6.00 a gallon. That’s not a sure thing, but it’s clearly possible.

For years Vermont’s climate change warriors have urged driving up oil and natural gas prices to force consumers to weatherize, and switch to alternatives such as “cold climate heat pumps” and advanced wood pellet furnaces.

The Climate Action Plan says, with commendable clarity, “The energy transition will not and cannot happen overnight. Many Vermonters are tied to investments they made in fossil vehicles or heating systems, with no realistic choice but to keep using them in the near term. Instead, a cost-effective and practical approach is to focus on the next point of purchase: that time—whether one, five, or ten years away—when a piece of equipment reaches the end of its life and needs to be replaced anyway. When that situation comes, we should use multiple policy, program, and incentive-based tools to equitably help people choose clean transportation and heating options and discourage locking in decades more of fossil fuel dependence that we can no longer afford—for consumer protection, health, and climate reasons.”

Until last year the favored “incentive based tool” was a carbon tax to drive up oil and gas prices. When that proved politically toxic, the Climate Council produced the Clean Heat Standard – not technically a tax, but an equally costly charge on your heating fuel bill to finance a complicated government-managed program to subsidize heat pump conversions and the like.

The CHS advocates must be rejoicing at the alarming runup in heating fuel prices, but instead of producing revenue to finance subsidizing of heating system conversions, the price increase is going into the private sector supply chain. Not only that, but the higher prices will probably make it impossible for the legislature to add a new charge on homes and businesses groaning under the cost of staying warm.

Over time, higher fossil fuel prices will drive a shift to more energy efficiency. Unless governments screw them up, markets work. Meanwhile, let’s hope that global warming brings us a string of milder winters.

John McClaughry is vice president of the Ethan Allen Institute.

Images courtesy of Vermont Fuel Dealers Association and John McClaughry
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9 thoughts on “McClaughry: Watch out for a heating oil crunch

  1. It was interesting watching some of the recent Lindsey Graham/Bernie Sanders debate. It’s too bad Graham isn’t a little quicker on his feet. Sanders gave him a great opening when Bernie said the reason for today’s high oil prices was profiteering by the oil companies – Bernie’s usual go-to strawman. But think about it. I would have replied to Bernie, ‘… so, when the price of oil was half of what it is today, just two years ago under the previous administration, the oil companies were only making half the profit?… and all of that after the Trump tax cuts??’ Go figure.

    • Profiteering by oil firms? A lie. Look at the last 10 years of oil prices & “profits”. Add up Exxon’s net income for those years ….they reported LOSSES in a couple when oil went to $10…. Then do the same calculatulation for Apple, Microsoft, Google, Facebook etc….and, just last year, APPLE profits topped $100 BILLION. Look at the Tech balance sheets, their “return on equity”….their share prices….(even now)… and admit that the REAL “profiteers” and windfall profits…forget oil….look at EVERY tech company! But Bernie will NEVER do that because every tech company, ESPECIALLY Facebook and Google, are interwined to a biased left agenda.

  2. There should be NO common ground on making citizens suffer during
    the cold season or lowering our cabon output by 0.001%.. All these
    leftist warm mongers need to be outed and voted out office to never
    run again. They don’t have the citizens interest at heart only the leftist
    agenda..

    • What we need is equality….”equality & DIVERSITY of protest”….If Montpelier is infested with near weekly Leftist & Diversity protest, why not others? Maybe it is time to have a protest march up State Stret….the two entities that are really spearheading “all things climate”….Leading is “The “Conservation Law Foundation”….not far behind is “The Nature Conservancy”… both are the ones behind the scenes…. feeding all the “doomsday-you-will-die-of fossil-fuels” – climate agenda hysteria……they support “Grass Roots” efforts……then the Dem party….then politicians, then the Legislature….then Media, then Press, and even down to teachers via agenda positions pushed by the NEA – for school levels K-College. I saw it with my two kids.

  3. Read Larry Kudlow, John Mc! He nailed it, with an article… Truth and facts….not “agenda”:

    “In a mere 18 months, Joe Biden’s presidency completely unraveled as a result of his big-government, socialist, woke policies. His own Democratic Party does not want him to run for re-election and he has learned nothing. …More spending, more borrowing, more money printing, more phony climate existential threats would make today’s dreadful economy even worse….
    It is true that Putin’s Ukraine invasion led to a roughly 1 million barrel per day drop in Russian oil production with the threat of more to come and that drove up world prices. However, after falling from roughly 10 million bpd to roughly 9 million bpd, Russian oil production has recently rebounded by at least half a million bpd. They have regrouped with new sales to Asia—primarily China and India.
    All that said, U.S. oil production, despite huge demands by business and consumers, remains over 1 million bpd below the pre-pandemic high. If we had that production back to where it should be, we would’ve covered the Russian shortfall and then some. Prices would be far lower than they are now.

    One more point: gasoline production has dropped from 10.2 million bpd to 9.5 million bpd recently. The inventory stock of gasoline has fallen from 272 million barrels at the end of 2021 to 229 million in the latest week. All this is a function of Biden’s (re: Progressives & Enviro’s) war against fossils (also the egregious EPA regulations have forced refineries to shut down). We’re not producing oil, we’re not producing gasoline. So, today’s AAA gas price reading is $5.01, a new record. “

  4. Let the statehouse, and the environmental agencies, be the guinea pig.
    Cut their carbon fuels by 65% This coming winter
    And then don’t listen to the uproar of complaints.
    They’re are in it, fighting global warming, to the end !!
    Just wear a snow-mobile suits boots and gloves folks !!??@?

  5. When are the protests coming to Montpelier – outside the offices of The Conservation Law Foundation (CLF) and Nature Conservancy? There should be. Because those two outfits are at the heart of ALL efforts, be it small, large, grass roots… and major lobbying presence in the VT legislature, media, press, politicians and education. And much of what their “say” is just plain false. But they get away with it. Quote from another Op-Ed:

    “Earlier this year, New England — located just a few hundred miles from the Marcellus Shale, one of the world’s largest natural gas fields — was forced to import a cargo of Russian liquefied natural gas. This was necessary because anti-energy activists have convinced local elected leaders to block new energy infrastructure, including pipelines that could bring American gas to the region. This is making households in the Northeast more dependent on imported energy, and forcing them to pay among the highest energy bills in the country.

    This was no accident. The Conservation Law Foundation, a prominent anti-energy group in Massachusetts, states on its website that importing natural gas from foreign counties is preferable to building new pipelines. The Sierra Club’s Massachusetts chapter has simply declared “No New Pipelines,” while the state’s attorney general thinks Russian LNG is better for the climate than piping in American fuel.”

  6. I guess they figure they can ride it out, and the rest of us can die or sell out cheap.
    Makes sense when the goal is 95% population reduction.
    I don’t see how it’s any less evil in the long run than “literally hitler”, pol pot, or any other genocider.
    Yes, environmentalism is the watermelon, green on the outside, red inside.

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