Man prepares to deliver heating oil to a house in Alexandria
Joshua Roberts  /  Reuters file
The Energy Information Administration's latest short-term outlook estimates that heating oil customers can expect to pay 23 percent more for fuel this winter than they did a year ago.
By John W. Schoen Senior producer
msnbc.com
updated 1/11/2006 12:39:44 PM ET 2006-01-11T17:39:44

With winter not yet half over, the surge in the cost of heating a home has already begun to stretch consumers’ budgets to the limit – and beyond. Sales of wood stoves have surged. In the farm belt, they’re burning surplus corn to keep warm. And a scarcity of funding for fuel assistance has squeezed millions of low-income families, as money budgeted for groceries or medical supplies is now being consumed by higher heating bills.

For Linda Kelly, a Quincy, Mass. mother of three, higher heating costs kicked in last October, just after her husband’s health plan doubled the co-payments on the family’s prescription drug coverage. Kelly suffers from multiple sclerosis and one of her daughters is diabetic. So without help paying the heating bill, the family faces some tough choices.

“Maybe (my daughter) won’t test as often as she should using the strips,” she said. “Maybe I’ll go an extra day, miss one pill during the week. You do what you can.” 

To make ends meet, Kelly first turned to the federal Low Income Home Energy Assistance Program, as she’s done for the past five winters. Under the 23-year-old program, assistance is available for a typical family of four earning less than $30,000 a year. But this winter, with energy prices soaring, funding for the program just hasn't kept up.

“When I was first on it, it was around $700 you got for the season,” she said. “That’s when (heating) oil was selling for 60 or 70 cents a gallon. Now it’s $2.59 a gallon, and we only get $525. So that doesn’t even fill a tank.”

This winter, help for the Kelly family came from an unlikely source -– the government of Venezuela. With federal funding unable to meet the needs of millions of families, Kelly’s Democratic Congressman, William Delahunt, turned to Venezuela, which arranged -- through state-owned Citgo Petroleum -- to sell millions of gallons of heating oil at below-market prices to low-income families in Massachusetts and New York. State officials in Maine and Rhode Island are working on a similar plan to buy discounted oil from Citgo.

Venezuelan leader Hugo Chavez, long a thorn in the side of the Bush administration, has said he is just trying to help poor families that have been ignored by their own government. Critics of the plan say he’s simply out to score political points.

As home heating costs have surged in the U.S., so has the number of families who can’t keep up with rising energy prices. And as cold weather set in this winter, local community service agencies like CTE, Inc. in Stamford, Conn. say they’ve been swamped with applications for assistance.

“Phone calls were out in the stratosphere,” said Keith Sears, who heads the program at CTE. “We’ve had to hire additional people just to handle the calls.”

The reason is simple: fuel prices have soared since last winter. The Energy Information Administration's latest short-term outlook, released Tuesday, estimates that heating oil customers can expect to pay 23 percent more for fuel this winter than they did a year ago. Households that rely on natural gas can expect an even bigger jump -– some 35 percent on average. And if temperatures are colder than normal, those bills will run even higher, the EIA said.

Home heating oil prices have risen as the global price of oil has jumped to more than $60 a barrel, more than doubling in the past two years. Natural gas prices have been pushed up by several forces: much of the gas-rich Gulf of Mexico was knocked offline by back-to-back hurricanes, and higher crude oil prices has pushed up demand for natural gas from industrial users who can switch fuels.

But even before the coldest weather has set in, federal funding of the LIHEAP fuel assistance program has badly lagged the rise in energy prices. This year, LIHEAP has been able to help fewer than 15 percent of the estimated 32 million households who qualify for assistance, according to the Campaign for Home Energy Assistance, a coalition of advocates for the federal program. So far this winter, some 5.6 million households have signed up, about 10 percent more than last year.

Congress last month approved $2.1 billion for LIHEAP for this winter, slightly less than last year's funding. Despite the surge in fuel prices the number of applications for assistance, funding for the program stands roughly where it was when the program was initiated in 1982.

Last summer, as part of a sweeping energy bill that provided financial incentives for the oil industry to drill more oil, tax credits for buyers of fuel efficient vehicles and funding to promote alternative energy, Congress authorized $5.1 billion for home heating aid. But, last month, it failed to follow through when it approved the final budget package as 2005 drew to a close.

To blunt the impact of higher fuel bills, many cold-weather homeowners have looked for alternatives. For those who can afford them, wood stoves have become a popular way to help keep warm; stove dealers report a sharp increase in sales and a backlog of installation orders. Sales of wood pellet stoves, which burn a special fuel made from sawdust and scrap wood, shot up 100 percent for the first nine months of the year, according to Don Johnson, a spokesman for a trade group that represents stove manufacturers.

“So many people are using them, there are some problems getting the fuel,” he said.

Some farm families have taken to burning corn in stoves made specifically for burning the grain. Golden Grain Stoves, based in Colorado, is sold out through April and has stopped taking orders for spring and summer deliveries.

“Every year interest and demand have increased, but this year it went nuts,” said Rod Havens, a company sales manager.

But for those with no alternatives to conventional fuels, monthly bills are taking a serious bite out of household budgets. And many families that have been getting by without assistance may still have to apply for help after the next monthly gas bill or the next oil delivery hits, according to Mark Wolfe, who heads a group that represents state energy assistance directors.

Heating oil customers are especially hard hit because few dealers offer the kind of year-round installment plans available to natural gas customers. As a result, some customers are only ordering half a tank at a time. Oil dealers, especially "mom and pop" operations, have a hard time extending credit because they need to maintain enough cash flow to buy more oil from wholesalers to keep up with deliveries.

Last week, the White House approved spending half of some $200 million in emergency funding available under the program, but lawmakers from several cold-weather states have warned that it won't be enough to make it through the winter. State governments have  begun to look for additional money from their own budgets, but so far only $177 million has been allocated, according to Wolfe.

“Right now, we’re kind of getting by.” He said. “But what happens next month?”

(The Associated Press contributed to this report.)

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