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Habitat Magazine Business of Management 2021

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ARCHIVE ARTICLE

Is It Time to Switch from Gas to Oil?

Earlier this year, as the novel coronavirus was spreading across the globe, the price of crude oil plummeted. At one point, barrels were selling for an impossible negative $30.

 

“There was too much oil!” says Tal Eyal, the executive vice president at FirstService Residential. And while that surplus may have had OPEC crying, it has trickled down to consumers, including co-op and condo boards, who are seeing lower prices for heating oil than they’ve seen in the past couple of years. Meanwhile, natural gas prices have been steadily rising.

 

“This is due to an increase in citywide heating demand, buildings converting from oil to natural gas heat, and insufficient natural gas pipeline capacity in New York,” says Alex Zafran, a senior consultant and business development lead at Aurora Energy Advisors. “Although the U.S. is rich with natural gas reserves, there is no new infrastructure to bring that gas to New York.”

 

In fact, in late May, National Grid declared a moratorium on new gas customers until New York’s Department of Environmental Conservation (DEC) approves permits for a new pipeline.

Does all this mean that buildings with dual-fuel boilers should be switching from natural gas to oil?

 

It’s complicated. When boards worked with utilities to finance conversions to dual-fuel boilers, many got locked into two- to four-year contracts to burn only natural gas. “It used to be that you didn’t have these gas contracts, and you could just go back and forth,” says Ira Meister, the president of Matthew Adam Properties. “But now, with gas contracts, you don’t have that flexibility.”

 

If a board signs such a contract, Eyal says, the utility expects the customer to buy a certain amount of gas at a certain price for a given period of time. Customers who break the agreement face high penalties for breach of contract. Another downside to breaking a contract: a dual-fuel building that switches to oil is subject to what’s called the floating rate, which can fluctuate and is generally higher than any contracted rate.

 

There is one more factor to consider: oil is harder on building systems than natural gas, so it costs more to maintain the boiler, pipes and chimney of an oil-burning system. So how much money is that low oil price really saving you?

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