With oil down, some area towns are in hot water

Last summer and fall it seemed as though oil prices would continue to climb, and many town and school officials were anxious to lock in heating fuel at between $3 and $4 a gallon.

But this winter prices went down, to less than $2.30 per gallon. Now some towns and schools are stuck with those high, locked-in prices, while others are feeling lucky they signed with a Hudson company that has been letting them out of their agreements.

The Fred Fuller Oil Company of Hudson has given price reductions to the towns of Amherst and Merrimack, as well as to the Amherst-Mont Vernon schools, the Wilton-Lyndeborough schools and the Bedford schools.

The Amherst school district, which buys about 65,000 gallons of oil a year for its five schools, locked in at $3.59 per gallon in October, said district business administrator Elizabeth Shankel.

But its last delivery was at $2.49 a gallon, she said. If prices go up, Amherst expects to see Fuller’s price go up, too, but never more than $3.59.

“(Fuller) has acted as a good corporate citizen and passed on savings, while still maintaining a profit level for his business,” said Shankel.

In Lyndeborough and Hollis, officials are not so happy.

Hollis Town Administrator Troy Brown said selectmen agreed to a price of $3.099 per gallon with Lorden Oil in September after requesting proposals all summer.

Unfortunately for Hollis, the board also decided not to buy “downside protection” because it would have added 15 cents a gallon, or $15,000, based on an order of 100,000 gallons.

Downside protection, which many oil companies offer to businesses and consumers, is a form of insurance that entails paying a little more per gallon up front in exchange for getting the per-gallon price on the day of delivery if it is lower than the locked-in price.

“In hindsight, the town will look at having a protection plan,” in the future. “It’s something we should consider,” said Brown.

“Once a decision has been made, as a business, we can’t absorb it,” A. J. Robichaud, Lorden’s general manager, said in November, when selectmen asked the company to renegotiate. He also pointed out that the Hollis-based company has helped the town over the years, donating 100 gallons of fuel for raffles and a boiler for the historical society’s building.

The town of Lyndeborough had contracted with Irving Oil at $4.08 a gallon.

Town administrator Jim Bingham said an Irving representative told him the company is not able to make an adjustment because they are locked in with their own supplier.

“We are not happy with it,” said Bingham, “especially when I know some oil companies” have re-negotiated.

Fuel oil is mainly used to heat the J.A. Tarbell Library, which uses less than 1,000 gallons for a winter season, but for the very small town, the extra cost means a lot.

“The library is getting hit and causing them to cut back on services,” said Bingham. “They are trying to keep hours open,” but the high fuel cost mean some programs could be cut and purchases of books and reference materials postponed.

Bob Rogers, chairman of the library board of trustees, said he understands that when “you sign a contract, it’s a contract.”

“But, on the other hand, I think Irving is big enough to absorb a very small reduction in profit for the public good,” he said. “I would think for public-relations purposes,” they would say sell oil for $3, not $4.

Fuller, which has 50,000 New Hampshire customers from Hudson to Lincoln, was able to give flexible deals because it had worked out flexible deals with its supplier, said Bill Fuller, son of the company’s founder.

“There’s a bunch of different ways you can structure a contract,” said Fuller, who did not want to say who the company’s supplier is or go into detail about its contracts.

The Bedford and Litchfield school districts are part of a six-district fuel-buying group that hired two Boston-area consultants to arrange their fuel oil deals, and the consultants recently negotiated a new price with Fuller.

Another lucky town was Mont Vernon, which signed a contract with a cap of $3.99 and now pays current market prices with the Crawford, Vogel and Wenzel Oil Company of Manchester, because they paid for downside protection.

Being able to get out of pre-buy contracts isn’t the norm, however.

Bob Garside, of the Oil Heat Council of New Hampshire, said fuel contracts are typically binding.

“If you sign a contract for X number of dollars for X amount of fuel, it’s a binding contract,” he said. Major wholesale suppliers “are not discounting the contract to the dealer.”

Three years ago, said Garside, “the consumer won,” because prices went up after customers locked in.

“This year, everyone in news media were hyping price increases,” he said, and the oil dealers won.