Last summer, Steuart Petroleum Co. revved up its corportate planes and flew 40 Washington fuel oil dealers to two crabfeasts near its big oil storage tanks here 60 miles southeast of Washington.
Seuart, Washington's largest fuel oil company, had some good news and some bad news for the local dealers whom it recently had taken on as wholesale customers.
The good news was that there would be plenty of home heating oil this winter for the approximately 100,000 Washington homes and apartments that use it.
The bad news was that the price would be high -- making oil heat prices in Washington higher than in most other cities in the nation, higher by an average of 10 cents a gallon than in nearby Baltimore.
Steuart's price is high because it buys its home heating oil from small Gulf coast refiners at world spot market prices -- traditionally low, but as high as $1.14 a gallon in the wake of the Iranian revolution. That was twice the amount Exxon was charging many of the same dealers for its oil on a recent day.
Steuart's wholesale price can be lower than the $1.14 a gallon it paid for some of its oil because that super-expensive oil is mixed in with other oil that Steuart obtained earlier at lower prices.
While Steuart will not disclose its share of the home heating oil market here, it is large. Forty of the 50 dealers in the Washington area receive at least some of their supply from the firm.
While Steuart captured its portion of the Washington wholesale market from major oil companies over the past few years, Baltimore was still getting most of its supplies from the majors, who had access to cheaper oil than Steuart can by at spot prices. Baltimore also is a big port city, and it costs less to transport oil to it than to Washington.
"We wanted to show our new customers our storage facilities and assure them that there was going to be an adequate supply," said Leonard P. Steuart II, president of Steuart Petroleum. "They told us the had to have the oil [at any price]."
Steuart said his assurances about supply came at a time of great uncertainty, with the nation entangled in gasoline lines and wondering whether there would be enough heating oil for the winter.
"They were trying to impress us and it was impressive," said one dealer. "They had six kinds of crabs. I was so full, when I got out on the highway I had to unbuckle my belt . . ."
Now that same dealer is angry.
"I'm really bitter and so are other dealers," he said. "If I had known that Steuart was getting [oil] from the spot market, I wouldn't have touched it with a 10-foot pole. Steuart has destroyed the Washington [oil] market."
"They were certainly aware of our supply sources," said Frank T. Steuart, a vice president of Steuart Petrolum who runs Colonial Fuel Oil, a retailer owned by Steuart. "They're just waking up to the reality of the thing. Everybody was upset. Hell, I was upset."
Leonard Steuart said this firm was "up front" with the dealers about price and supply, but that he is "not certain" if it was made completely clear to them that Steuart was obtaining oil at spot market prices.
Still, it wouldn't have mattered, he said. The choice faced by the dealers -- and by Washington area consumers -- was to buy high-priced Steuart oil or no oil at all.
Frank Steuart conceded that Steuart Petroleum's role in the Washington market has "a lot to do" with the average heating oil price in Washington being higher than in Baltimore.
Another reason may be that the Washington market tends to be less competitive because of its general affluence.
The 40 dealers that Steuart supplies range in size from small, inner-city firms with 1,000 customers to the area's largest home heating oil dealer, Griffith-Consumers Co., with 40,000 customers.
Steuart in each case supplies only a portion of the wholesale oil that the dealers need -- 20 percent in the case of Griffith Consumers, for example, 50 percent in the case of U-Save Oil Co., a small northeast Washington firm.
"Quite frankly, we're quite concerned about [Steuart's] price," said Griffith-Consumers President Walter J. Meighan.
U-Save President William Higgins said he was retailing oil almost at cost because he was worried he might lose customers, selling it for 89 cents at a time when Steuart's price to him was 86.94 cents.
Steuart's price has since dropped to about 82 cents.
Steuart is basically a middleman. It does not produce oil, but it buys from producers and has a huge distribution system and storage capacity in the Washington area.
The 27 big tanks at Piney Point, for example, hold 46 million gallons of home heating oil -- enough to heat 40,000 homes for the entire winter -- plus 110 million gallons of heavy heathing oil and other petroleum products.
Home heating oil is tan and of medium weight. Heavy heating oil, used in large apartment and office buildings, is black and gooey. In all, 300,000 Washington area dwelling units are heated by one or the other.
Until it began wholesaling home heating oil a few years ago, Steuart dealt exclusively in heavy heating oil. It still dominates more than half that market here, with Amerada Hess Corp. taking the rest.
According to Leonard Steuart, they moved into home heating oil when it appeared that some of the major oil companies were drawing back, preferring to emphasize more profitable areas of the oil business such as petro-chemical products.