Price gouging on home heating oil
By: Source: AARP Bulletin Today Date Posted: November 2004
With oil prices rocketing to record highs last month, and predicted to rise even higher this winter, consumer advocates are warning home heating oil customers to guard against price gouging and scams.
Advocates fear that some oil suppliers won’t deliver the promised fuel at the promised price to customers who locked in at prepaid and discounted rates during summer, when demand was down and supplies were up.
Charlie Harak, an attorney with the National Consumer Law Center in Boston, says suppliers may try to breach their fixed-price contracts "if they can’t buy fuel oil anywhere near that price."
Additionally, he says, some contracts have provisions that release the seller from the deal if oil prices exceed a certain amount. That could leave consumers in the lurch and forced to buy at the height of the season when prices are higher and inventories are lower.
"Oil prices are over $54 a barrel now," Harak said in October. "There’s a distinct possibility that some sellers won’t carry through if prices go too high. There are few people who’ll deliver at $1.75 a gallon when the market is at $2.25 a gallon. If prices go too high, some sellers might go out of business."
Though most suppliers operate aboveboard, Barbara Petito, a spokeswoman for the Pennsylvania attorney general’s office, says some suppliers "intentionally low-ball customers" to sell them prepaid contracts.
That’s what happened in Philadelphia four years ago, when Marvin Cohen, owner of Whitaker Oil Co., was charged with defrauding customers after offering them a discounted rate for oil if they paid up front and before the heating season began.
When winter approached and customers called him for deliveries, prosecutors said, Cohen never came through. He subsequently declared bankruptcy and was sentenced to up to two years of house arrest and ordered to repay $20,995 to customers.
In Massachusetts, an oil company got in trouble with state regulators four years ago when it reneged on its prepaid contracts with 6,000 customers. Executives at Peterson Oil Co. said at the time that because its wholesale costs had soared, it couldn’t give buyers the lower rate it had guaranteed. Authorities ultimately forced Peterson to make good on its contracts.
Before locking in a price with a supplier, says Frank Donaghue, director of the Bureau of Consumer Protection at the Pennsylvania attorney general’s office, consumers should investigate how long a company has been in business and whether complaints have been lodged against it. Most state attorneys general and local Better Business Bureaus log such complaints.
"You should also find out what their track record is when supplies run short," he says. The Massachusetts attorney general’s office warns home heating oil customers to be alert for possible price gouging—when dealers take advantage of a cold snap, for example, and charge unreasonably high prices. Gouging may be especially difficult to detect when prices are already at all-time highs, but comparison pricing will give buyers a base line.
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