A chart in yesterday's editions illustrating stories explaining heating oil supplies and prices here inadvertently omitted the name of Shell Oil Co. as a supply source for Quarles-Robertson Oil Inc. CAPTION: Picture, Frank Steuart stands near a control valve at the Steuart Petroleum Company's tank farm facility located 60 miles southeast of the District at Piney Point, Md. By Lucian Perkins -- The Washington Post; (NEW-LINE)Chart, From Producer To Consumer, The Washington Post
Back in the oil-rich days of last fall, before Iranian crude production was cut off and prices were soaring, the price of a gallon of home heating oil in Washington varied from dealer to dealer by only a few tenths of a cent. And that was enough to send customers out shopping.
This winter, though, the price of a gallon of heating oil can vary by nearly 13 cents. But homeowners are hanging onto their dealers no matter what the price -- fearful of losing their suppliers as the weather turns colder.
They're staying put despite a possible savings of about $150 over the course of the winter for the average customer who burns 1,100 gallons and switches from the highest-priced dealer to the lowest priced.
The highest prices here are charged by small, inner-city dealers who serve many low-income customers.
Those are some of the strange new facts of life about the intricate heating oil supply system in Washington -- a chain of big and little suppliers, middlemen and major companies that this year has produced such a variety of prices for the 300,000 households in this area that burn oil.
One oil dealer, Metropolitan Fuels Co., a Bethesda firm with 9,000 mostly affluent suburban customers, had the area's lowest price on a recent day -- 82.2 cents a gallon. Meanwhile, the 1,250 customers of T. Washington Fuel Oil Co., a Southeast Washington distributor, had to pay 95 cents a gallon.
The District sales tax pushed that 95 cents to $1 a gallon. Virginia has a 4 percent sales tax, but Maryland dropped the sales tax on home heating oil last summer.
But if the customers wanted to switch, they probably couldn't. The local heating oil dealers have informally divided up the Washington market to maximize the number of deliveries they can make in a day. Dealers tend not to accept new customers who live too far from their home base.
In practice, few customers actually could benefit from such a switch because the lowest-priced dealer, unable to get more cheap oil from his supplier, would have to buy it at high spot market prices to satisfy any surge in demand.
"Right now customers aren't jumping around," said James T. Curtis, president of Metropolitan. "We're the lowest . . . and people are just not coming to us."
Specifically, local dealers give these reasons for what is happening.
Heating oil prices are not controlled by the government, and anyone along the supply chain can imcrease his markup as he wishes, subject to market forces.
Major oil companies, which supply most of the 50 local retail dealers with at least some of their home heating oil, charge widely varying wholesale prices that depend largely on the prices they pay for crude oil.
Many major suppliers are limiting shipments to local dealers, forcing them to buy heating oil wherever they can -- usually at high prices -- to meet the demand of their customers.
Federal rules lock dealers into relationships with past suppliers, so that dealers with high-priced suppliers can't shop around. The natural market tendency for prices to average themselves out is blocked.
Some local dealers -- particularly the small ones who supply low-income families -- buy their oil wholesale at the end of a chain that includes several middlemen, each taking a profit.
As recently as September 1978, most of the dealers here were charging slightly over 49 cents a gallon for home heating oil. Now prices have soared by 50 to 100 percent. On a recent day, for instance, a customer could pay 88.9 cents a gallon at Griffith-Consumers Co., 89.9 at Colonial Fuel Co., 85.9 at A. P. Woodson Co., and 86.9 at Quarles-Robertson Oil Inc.
A high retail price does not always mean that a dealer is making a good profit. That depends on the markup between his buying and selling prices, and on his expenses.
The following examples show how these factors influence home heating oil prices in Washington. Prices quoted were recorded on recent days and may not be current. Low Man
The reason's for Metropolitan's low 82.2 cent price is simple.
For years, the firm has received its oil from Exxon, and Exxon's wholesale price for home heating oil was the lowest in town -- 62.3 cents a gallon. Then Metropolitan sold directly to its customers -- with no middlemen to raise the price along the way.
"When Exxon was high, we stuck with them," Curtis said. "We turned down spot buys (of oil at lower prices than Exxon was charging at the time). Now, Exxon will help us."
Exxon recently bought full-page newspaper ads to proclaim its low price, but gave no reason for it. Industry observers say one reason is that Exxon has access to large quantities of relatively inexpensive Saudi Arabian oil. High Man
Then why is T. Washington so high at 95 cents a gallon?
The small firm is forced to buy its oil at a high price through a chain of middlemen.
At about the time it was charging 95 cents, T. Washington was paying 82.9 cents to its only supplier, Colonial Fuel Co., a Northwest firm with 5,500 retail customers of its own and few small wholesale customers like T. Washington.
Colonial, in turn, bought oil from Steuart Petroleum Co., a large local middleman, and from Amoco, a major oil company. Amoco charged Colonial 69 cents -- seven cents higher than Exxon, but still not considered outlandish. But Steuart's wholesale price to Colonial was a stunning 82.9 cents a gallon -- so high that Colonial President Frank T. Steuart said that he could not, in good conscience, charge T. Washington and other small firms more than that.
Steuart Petroleum bought Colonial last January, increasing the proportion of Colonial's oil that it supplies from 30 to 50 percent at that time.
"Colonial is like a parent to these [small] dealers," said Frank Steuart. "I've been giving them [and taking a loss of] a nickel a gallon. Now I'm just breaking even."
Steuart Petroleum has had to pay up to $1.14 a gallon for oil from small refiners under contracts keyed to world spot market prices that soared after the Iranian disruption last December.
Despite its high price, T. Washington is working with a far slimmer markup or profit margin than larger firms say they need to survive -- about 15 percent of wholesale cost. Griffith's Meighan said 30 percent is considered adequate for a larger firm. In the Middle
Many are dealers avoid the high-price squeeze by relying on more than one supplier.
The A. P. Woodson Co., for example, sold its oil on a recent day for 85.9 cents. Woodson gets its supplies from BP, Crown, Exxon, Gulf, Amoco, Texaco and -- on a small, "backup" basis -- from Steuart.
The price was higher -- 88.9 cents -- on a recent day at Griffith-Consumers, the area's largest home heating oil dealer with about 40,000 customers.
And Griffith-Consumers has fewer suppliers than Woodson. It received oil from Exxon at 62.3 cents and from Arco at 68.2 cents -- but still had to rely on Steuart for about 20 percent of its supply. A Spot Buy
When Quarles-Robertson Oil Inc. ran low on oil, the small Fairfax County dealer went out and bought a load for its 4,000 customers at a high price on the spot market.
Usually Quarles-Robertson buys most of its oil from Shell, with smaller purchases from Steuart and others.
But recently it could not get enough because its suppliers were limiting deliveries.
At the same time, its customers, panicked by summer gas lines, were demanding that their heating oil tanks be filled early.
"People were topping off their heating oil tanks," said Rolfe Robertson, the firm's secretary-treasurer. "A lot of people took only 20 to 50 gallons, and one customer (called the heating oil truck to his home) and then took only 1.6 gallons. That's a little bit hysterical."
In any case, Quarles-Robertson, along with several of its sister companies, bought 200,000 gallons at 83 cents a gallon early last summer when its retail prices was 74.9 cents, Robertson said.
That spot buy helped drive its price up to its current level of 86.9 cents -- but it did mean that the firm's customers had all the oil they wanted. c
The purchase was made from First Energy Corp., a Richmond firm that buys its oil from major oil companies. "It was just a normal sales situation," said W. E. Stearns, general manager of First Energy. Not So Normal
Another Washington area dealer caught with high-priced suppliers also solved his problem by getting extra oil on a spot basis -- but he broke federal rules to do it.
The dealer, who asked not to be identified, described the purchase this way:
He knew of a Baltimore dealer who was supplied by a major oil company at a low price. The Baltimore dealer was able, under federal rules, to get more oil from this supplier than his customers wanted.
So he sold it under the table to the Washington dealer instead of letting the supplier retain it as he should have under the rules.
The oil was to be picked up at the supplier's tank farm in Baltimore harbor by an independent trucker. The trucker carried two bills of lading with him.
When the trucker picked up the oil at the tank farm, he gave the supplier a false bill of lading that said that the oil was being delivered to the Baltimore firm.
Then he drove the oil to the Washington firm instead, giving it the second bill of lading, which showed the oil being delivered to it.