The sources to the left are an eye opener into what's happening in the volatile energy market. We read these sources every day, as well as consult with our suppliers. The biggest problem for the last few years has been the presence of major commodity speculators who drive the price up and down on a moment's notice without regard to basic supply and demand. Trading by speculators added as much as $50.00 per barrel of oil to its real fundamental price in recent years, producing price jumps on rumors of problems in Iraq or Nigeria or hurricane forecasts.

Since 1999 we've achieved discounts of up to 50 cents a gallon on oil and kerosene, and from 50 cents to $1.00 on propane with the exception of 2006 where again we offered excellent discounts on propane, but for the first time since 1999 our oil savings were much less significant due to the El Nino.

In 2007-2008, our lowest price for oil, $2.38/gallon was $2.50 below the high cash/market price in February, 2008. Our lowest propane price, $1.74/gallon was over $2.50 below market prices.

 In 2008-2009,  our nine years of experience in the energy market led us to predict in early Spring that speculators had overheated the market and that prices would have to fall after strong gains. We decided not to carry out any pre-buys in oil until the market bubble crashed. Instead, we developed the "rack plus" program for residents. Prices have been below $2.00/gallon for oil since mid December with a low of $1.74 with our most competitive dealer. on December 30th. We did carry out pre-buys with two of our four dealers once prices had dropped over $1.50/gallon from their peak, recommending that members "hedge" with a partial pre-buy for what we expected to be higher prices in deep winter and then go back to rack plus in Spring. Sadly, those who ignored our warnings, including many schools,  were locked in with $4.59 and $4.94 pre-buys.

Like the rest of the world, we were totally blindsided by the global financial meltdown caused by the greed and stupidity of Wall Street and the investment banks. In a few months

As usual, we did a pre-buy on propane.  Given supply and demand conditions in the Fall, the price was reasonable before the Wall Street crash. Thus, current prices of propane have dropped to about the same price members are paying. Members on propane are not saving much if anything, but at least they are not losing much. It is the first time in our history that we did not save our propane members at least 50¢ per gallon.

$30 trillion dollars of the average US citizens savings disappeared from the stock market in a few months. Banks so large they "couldn't fail", were bankrupt, after the shrinkage in assets. The S&P 500 plunged 38 percent last year, the most since 1937, after the economy entered a recession and the biggest financial firms lost more than $1 trillion on subprime-related loans and securities. Unemployment rose to 7%, the highest since 1993, and still rising.

Oil demand dropped from a forecasted 2% global increase to a net worldwide decrease in demand for 2008 and 2009. OPEC has slashed production by 3.5 million barrels a day since Nov 1, in an attempt to stop the bleeding.

It is still too early to tell what will happen next winter. Prices now are in "contango", that is, though prices are low today, they are higher for next winter. OPEC has made huge cuts in supply which will take six months to have any effect. In the meantime, traders are storing today's cheap oil , counting on higher prices next winter.

What you can count on is that prices will surge higher as soon as we begin to emerge from the recession. Oil supply is still tight in a normally functioning global economy. Though President Obama's proposed emphasis on renewable and alternate energy is definitely an excellent and needed strategy, it will be years before we see any substantial results.

In the short to medium term, the price has to go up. Oil is trading at roughly $40.00/bbl now. OPEC needs at least $60/bbl and higher to balance its books. Saudi Arabia has set the desired bar at $75/bbl., almost double today's price.