George A. Carter cradled the phone on his shoulder, speaking into it encouragingly. Suddenly he recoiled, wrestling with the phone as if it had attacked him. "Oh Lord. Oh no, Mr. Hughes . . . "
Carter is a small Washington-area home heating oil distributor with five trucks and 1,000 customers. Hughes is one of his customers.
Hughes is switching to gas.
Washington's oil heat industry -- about 50 distributors who buy wholesale from distant refiners and resell to the owners and occupants of a third of the area's million houses and apartment units -- is facing what its spokesmen say may be the toughest winter in its history.
Oil prices have soared nearly 100 percent over what they were last winter. Oil customers are edgy, worried. So are local legislators.As winter approaches, the media -- particularly television -- have paid unprecedented attention to this fragmented, unregulated and previously low-profile industry.
It's been easy for oil men to get defensive.
"The press is making us look like a bunch of bastards," said Jim Windsor, executive director of the Oil Heat Association of Greater Washington. "These [local] oil men are just normal people trying to make a living."
Heating oil for individual homes is a medium weight, brown-colored liquid that now sells here for between 84 and 90 cents a gallon, up from the 48- to 55-cent range of November 1978.
Oil burned in commercial buildings is heavy and black and may solidify if not kept heated. It now sells in the Washington area for 68 to 91 cents a gallon, compared with a 40- to 47-cent range last November.
The prices vary because of varying overhead costs, because some refiners charge more than others, and because some distributors here obtain their oil through chains of supply that include more middlemen, each taking a profit.
The local oil heat association's past president, Joe Amato of Amato Heating Oil in Silver Spring, emphasized that the area's oil distributors are small and medium-sized businessmen who must be paid for the oil they deliver or they will go out of business.
"It is essential they be paid," Amato said. "A lot of government agencies are asking what we'll do for the poor when they run out of oil. We're trying to steer consumers in the right direction [to government agencies] before they're sitting with empty oil tanks on a freezing night."
Government agencies have no power to order distributors to make deliveries to the poor. Congress is considering legislation that would provide grants to the poor to help pay their heating bills. About $350,000 was distributed last year in the District of Columbia under similar legislation, but not until the heating season was over.
Apartment owners here are worried that rent control will prevent them from passing through increased oil heat costs to their tenants. The D.C. City Council is moving to deal with this problem, although no legislation has been introduced yet.
Sam Jordan, a special assistant to D.C. Mayor Marion Barry, said the city will make sure no one goes cold this winter. If necessary, the city will pay oil bills and then collect from landlords, Jordan said.
"If it comes to life and death, you take off the kid gloves," he said.
Janet Shorey of the Maryland Energy Policy Office said: "There were plenty of people who had to leave their homes last year when oil went to 47 cents a gallon. They moved in with relatives. There will be more of that this year."
Amato offered a tip for those who cannot afford 100 gallons, the minimum most dealers will deliver: "Have three or four 5-gallon cans on hand. Buy kerosene . . . and drop it in the oil tank. That'll last through the night."
Other industry sources recommended diesel fuel as an acceptable substitute for home heating oil.
Credit is tightening, even for those who can afford that 100 gallons. Regular credit customers will have less time to pay. Occasional and bad credit customers will have to pay on the spot with money orders or certified checks.
That's because suppliers are putting a credit squeeze on the local oil distributors, Amato said, and because of high interest rates and carrying charges. If a distributor had to borrow $500,000 last year to stock up for winter, he needs $1 million this year.
But there is a bright side for the distributors.
For one thing, supplies of heating oil should be plentiful. "There is no worry about supply," Amato said flatly, agreeing with federal energy officials who have said that the same is true nationally.
For another thing, the profit margins of local distributors have risen along with the price jump. This means that their incomes should be roughly double what they were last year.
The profit margin of a distributor is the difference between the price he pays for oil and the price at which he resells it. Out of this income, he must pay operating expenses and overhead -- both of which, Amato said, rose dramatically in recent years while profit margins did not.
This year the distributors may again be able to make good money. Amato's profit margin of 11 cents a gallon last year (with oil selling for 45 cents to consumers) has risen to 21 cents a gallon this year (on oil that is selling for 83.9 cents a gallon).
That's a 25 percent margin for Amato this year, up just one percentage point from last year despite the doubling of actual income. Amato said a 25 percent margin -- typical for distributors here -- is "lousy."
"I should be making a minimum of 30 percent (25 cents a gallon at the current price), but I can't go to 30 percent now for competitive reasons."
Carter cooed into the phone, trying to dissuade Hughes from switching to gas. About a half dozen of his customers have notified him that they have switched and he doesn't want to lose any more. "They got so much [heating] oil they don't know what to do with it. The problem is the price . . . That's right, you can't win."
That didn't work, so Carter switched to another line of argument. "You couldn't recover your money for a [new] gas boiler in 20 years. In a lot of places, we're updating the [oil] furnace, making it anywhere from 15 to 25 percent more efficient . . . "
That didn't work either.
By this time, other telephone lines were ringing in Carter's tiny, cluttered office on the second floor of a northeast Washington house. He switched from line to line, trying to explain why oil prices are so high, assuring people that plenty of oil would be available this winter.
A women trudged up the stairs.
"I want to pay you for that oil you brought me," she said. She smiled warmly, cementing her relationship with Carter, assuring her supply.
Carter, a large man in off-spotted blue workclothes, jumped up from the phone to welcome her.
"Uh, that's $150 . . . "
The women wrote a check.
James T. Hughes and his wife have lived nearly 40 years in the tall Victorian row house at 1804 First St. NW. They have always had oil heat.
"I'm going to switch to gas," Hughes said flatly. "This is a long-range thing. Invest $2,500 now for your long-range comfort."
"If you can't get the oil, I don't care if you have a million dollars, you still can't get it," said Hughes' wife, who asked that her name not be printed.
Hughes, a CIA retiree, does not have a million dollars.
Last winter, as he has most winters, Hughes burned eight tanks of oil. At about 180 gallons a fill -- up at roughly 45 cents a gallon, that came to $650.
This winter the same amount of oil would cost Hughes nearly $1,300 at Carter's current price of 89.9 cents a gallon.
According to a spokesman for Washington Gas Light Co., the average house in the District of Columbia -- including Hughes's -- can be heated with gas this winter for $450.
U.S. Department of Energy statistics show that oil heat was 42 percent more expensive than gas last March and 82 percent more expensive last month.
While gas heat prices are rising, it may be years before they catch up with oil, energy officials say. The WGL spokesman said gas prices to consumers here should rise 15 percent a year for the next five years.
Windsor, the oil heat association man, disagreed. He said gas prices should catch up with oil prices in the next year and a half.
"Is it fair to encourage John Doe to get a $2,000 gas furnace when he may never recover the money?" said Windsor. "He may recover it, but he may not."
WGL has had 4,000 requests since June to switch homes from oil to gas, the spokesman said. So far, the company has promised to change 1,100 of these customers -- Hughes among them.
D.C. People's Counsel, Brian Lederer, who officially represents District of Columbia consumers in rate hearings, said that the city itself and universities located here should switch from oil to gas.
"It's one way to relieve the fuel oil crunch," said Lederer. "WGL has an awful lot of gas."
Carter doesn't agree.
"There's going to be plenty of oil. It all comes out of the same hole in the ground."