Weekly Spending Update – Sept. 2 – Oil Purchase

Weekly Spending 9-2-18

This week’s chart is heavily skewed. As you can see fuel is a big part of it. I debated how to categorize it, whether or not I should put our annual oil purchase in it’s own category or not. There is only like $30 in gas in that, and the rest is our annual oil purchase.

We have a nice home in a great town with fantastic schools. We do not have a natural gas hookup, so we are on heating oil. Now, I would love to put in natural gas for a variety of reasons, but the nearest like is roughly .75 miles away. Even if it were on my street, it would be a tough call as my property is oddly shaped and my home is far from the street. I actually called the natural gas company, and asked, and they said there was no plan to put the gas on my street due to the cost, and the low number of homes that could be reached. So, getting off oil for gas is not an option.

We did make a real impact on our oil use by installing 2 air source heat pumps. We did one 3 winters ago, and the second 2 winters ago. The question was, would they help? We bought the first as an alternative to central air conditioning. The home had 3, through the wall, AC units, and they were old, loud, and not very efficient. The heat pumps supply our cooling now, and do it quietly, and for less money. Our cooling bills have dropped, and our house is cooler and drier than it was. The heat and humidity in particular for this summer has made the dehumidifying effect essential. It’s been brutal with over 9″ of rain in our town for the month of August; that’s more than twice the normal total!

The first heat pump was purchased for the cooling. That first winter, we found that our heating bill dropped, as the heat from the thing is powerful. We were able to lower our heating bill by a significant amount that first winter. Basically, the thing runs most efficiently in heating mode at 40F and above, and it trails off below that number. It’s rated to supply heat as long as it’s above 5F, and that cold is rare in this area. When you do the math, and I am an engineer, so I love doing the math, the comparison is between the efficiency of our furnace, which also supplies our hot water in an on demand system, and that of the heat pump. The furnace is about 33 years old, and gets annual checkups.

Part of the checkup, they tell us that we get about 90% efficiency out of it which is great for oil and it’s time. The other 10% goes up the chimney. The heat pump, in heat mode, moves about 10 BTU of heat for every BTU equivalent of electricity. 1 watt hour of energy is about 3.4 BTU hours of heat. Comparing the cost of electricity, with that rough ratio, and the efficiency of our furnace and the cost of oil, and you see the balancing act we have.

40F is a guide. Since the efficiency is not 10x, but more like 1.5-3, even on the manufacturers website, and even then it’s dependent on ambient temperature. Our heat pumps are shaded in the summer by trees, as is most of our land, and they get direct sun in the winter, which helps the efficiency.

We tend to use the heat pumps more heavily when it’s 30-40F and higher, and less below that. We found that the BTUs from the furnace just can’t be beat. That does mean that the furnace really is only used from December to February for heating, but again year round for our hot water. Even then, some days in those months are warm, and we can use them at least when the sun is up.

The result is that our oil use has dropped 200 to 300 gallons a year, and that’s a lot of money; that’s about 25% to 30% of our usage. It also means that if we stay in the house for 10 years, the units will pay for themselves.

Then there is the other part of oil, buying it. If you prepay certain companies will give you a noticeable discount per gallon; ours is $0.25. The problem is that I am picking what will happen in the oil market. I have no idea what will happen in the oil market. In the 6 winters we have been here, I have guessed wrong as often as I have guessed correctly. One does not have to prebuy the oil, but I prefer to for the piece of mind. If oil spikes, then it will cost us a lot more. If oil drops, then we will lose. Without getting too heavily into politics, there are geopolitical reasons, this year in particular, to think that the oil market will have a supply crunch this fall for a few political reasons. Now for every article like that, I can find another talking about prices going down.

That scare was there before, and it did not happen. That time the political issue cooled down before it impacted oil prices, and the winter that year was light. While I look at the long term forecasts from NOAA, they are not really correct. Nor is the forecast from our two favorite almanacs. I am talking about specifically for my area, not nationwide. My point is in tracking it every year for the last 6 years, I have found all 3 sources to get it right basically only half the time.

I have done a small pre-buy, a large one, and none at all. There is no guessing. Now you might be saying, don’t be a gloomy GenX, but I must say that I will continue to test out their models, but I think that Yogi Berra said it best when he said, “its tough to make predictions, especially about the future.” Yogi was a New York Yankee baseball player from the golden age of NY baseball, 1948 to 1958.

So, ultimately, I pre-buy, and prevent a big loss, and often will take a small loss. Oil won’t spike that much, nor drop that much, and I have that piece of mind. That is worth something to my wife and I.

Wow, this post is really all about the oil, but then that buy was the big expense for last week. I’d love to hear your thoughts on any of this, especially if you disagree with any of my thoughts or opinions.

I should add, almost as a postscript, that I do keep a chart of oil usage by marking the dates of when we get a refill on our tank, how much oil was refilled, and then determining the average usage per day between refills. While each winter is variable in terms of temperature, there was definitely a step down in oil usage after we got the heat pumps. That is a good thing.

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