PORTLAND (AP) – The scary news surfaced around Halloween, a time when the sounds of thermostats kicking in and furnaces firing up echo in homes across New England, heralding the onset of colder weather.

The average price of No. 2 heating oil in Maine had surpassed the $2-a-gallon mark for the first time ever. Whether prices will continue to rise, and if so by how much, is anyone’s guess, experts say.

The latest weekly survey by the State Planning Office found that heating oil had gone up 2 cents per gallon to $2.01, a 31-cent jump over the previous month and 72 cents higher than at this time last year.

Prices were even higher to the south: $2.07 in Connecticut and Rhode Island, and $2.04 in Massachusetts. It was $2.01 in Vermont and $1.94 in New Hampshire.

The rise in world oil prices, with benchmark crude oil futures hitting $55 a barrel before falling back in recent days, resonates strongly in Maine, whose reliance on oil for home heating is thought to be the nation’s highest.

The Northeast is the nation’s biggest heating oil market. In Maine, where natural gas distribution lines cover only a limited area, more than 400,000 homes, or 80 percent of the total, rely on oil as their primary source of heat.

The typical home uses 850 to 900 gallons a year, according to the Maine Oil Dealers Association.

At an additional 70 cents per gallon, homeowners would be paying an extra $600 a year for heating oil. That would mean an additional $250 million in energy costs if everyone were paying the current high prices.

But that figure fails to take into account price protection programs that have insulated many homeowners from the full impact.

“Less than half our customers are paying that two-dollar price today,” said John Peters, executive vice president of Downeast Energy in Brunswick. “They’re paying either the cap price or the fixed price.”

At Dead River Co., more than 40 percent of his customers have price protection. “They’re extremely happy, as they should be,” said Bob Moore, senior vice president.

Dealers use a range of hedging devices such as futures contracts to offset potential losses.

The higher cost of heating oil is bound to affect the state’s economy as money normally available for discretionary spending now goes toward keeping warm. But the full impact will depend on how long the higher prices remain in effect, said former state economist Charles Colgan, a professor at the University of Southern Maine’s Muskie Institute.

“Although it pinches in the short term, if the high prices are not sustained it probably won’t have that much of an effect,” he said. “From an overall economic perspective it hasn’t been a problem yet, but if it keeps going it’s going to become one,” he said.

Colgan said traders have built a risk premium of $15 or $20 per barrel into the world oil price.

“It’s all because of uncertainties in the Middle East and elsewhere,” he said. “I think these uncertainties are going to be prolonged, so we could be looking at several more months at these levels.”

Prices generally tend to rise during the heating season, although there have been years when a mild winter has led to a price drop, said Beth Nagusky, director of the state Office of Energy Independence and Security.

But other factors govern the direction of prices, she noted, ranging from growing demand in China to events in Iraq and labor unrest in Nigeria.

Representatives of state agencies have been meeting to address potential problems ranging from a supply shortage, which is seen as unlikely, to the financial squeeze on low-income residents struggling to keep warm.

Maine officials have joined with their counterparts in other cold-weather states in pressing the federal government to increase spending on its low-income heating assistance program.

Dramatic spikes in heating oil prices are not new, Nagusky said, noting that prices would have to rise to $2.76 per gallon to match the inflation adjusted price during the winter of 1980-81.

But she admits that’s not likely to offer much solace to people struggling to pay the fuel bills this winter.

“If people have to choose between going without food or medicine or heat, those are pretty horrible choices,” she said.


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