Oil price increase affecting budgets.

Owners and boards are focusing on boilers and budgets more than ever since oil prices zoomed more than a third higher than last year in response to world markets.

The OPEC nations had vowed to pump the price to $25 a barrel, and last week that mark was passed, as crude futures made it to $27. By comparison, at the end of last winter, a crude barrel cost around $11.

Last week, when the United Nations did not provide Iraq with a six-month extension for the oil sales it needs to purchase essential foods and medicine, its leader, Saddam Hussein, protested by keeping much of the country's expected production off the market.

While the United States buys most of its oil from South America, the actions combined to create sticker shock on recent deliveries, prompting owners to focus on what they could do to reduce costs.

Oil is traded on the New York Mercantile Exchange by the 1,000 barrel grouping, which is equivalent to 42,000 U.S. gallons. It is also traded over an 18-month future period, which is designed to cover two winters and maintain pricing stability.

In recent years, oil prices have risen in the fall and then leveled off as the world countries responded. If officials become concerned about their constituencies' ability to pay oil bills, for instance, the U.S. can release some of its own oil reserves. That reduces the price pressure that is felt the most in the Northeast, which is very reliant on oil.

In other years, a South American nation or two has broken with the OPEC ranks, selling more of its own oil than agreed at a discount, with the end effect of lowering the overall price.

But when politics is played on the world gameboard, the outcome is never clear.

"At this point we're not looking at a crisis, but looking at costs returning to historically normal 'levels," said Dan Margulies, executive director of the Community Housing Improvement Program, (CHIP) a middle market owners group.

"It's exactly the kind of thing we tell the Rent Guidelines Board each year," he continued. "Just because the oil prices are low in April, doesn't mean they won't snap back."

Margulies advised following the oil market, joining purchasing cooperatives, and developing relationships with more than one vendor to find supplies at competitive prices.

"When the oil goes up, it becomes more valuable and ends up getting more attention," agreed James Slattery, executive vice president of sales and marketing at Stuyvesant Fuel. "You have to keep a good eye on your equipment and make sure you are running efficiently."

Additional electronic monitoring systems have become de rigueur, and early models have been replaced with those that act as alarms and provide even more information for owners.

"My business is booming," said Gerald Pindus, president of U.S. Energy Controls, who is also an owner/manager of residential apartment buildings in New York and Philadelphia, and a vice president of CHIP. He developed his system more than a decade ago to prevent overheating and is constantly updating the controls to provide more information for himself and his client owners.

"The first objective was to heat the building so the tenants didn't open their brand new, energy-saving windows to balance the heat," he explained.

What became more important, Pindus found, was the ability to monitor the amount of oil used by the burner, the water losses to the boiler, and the amount of time the boiler took to reach the correct pressure. The stack temperature is also monitored to ensure the heat is not sent out the chimney.

"We have a fuel monitor that reminds the super and the office when a fuel delivery is required," Pindus said. "It sends out warning messages by telephone." Drawing on his own properties, he found the dial-out useful because there is a small tank in one building that requires frequent deliveries. "The reminder is critical," he explained. "If the super is away or forgets, it calls me, too."

The same unit also monitors the deliveries. "Recently, for one of our own buildings, when we compared the delivery on the computer to the ticket, we found a 250 gallon difference. We called the oil company and they gave us a credit."

Heating monitors such as U.S. Energy Controls and Optimum Applied Systems also monitor water mains and domestic hot water.

"It's mandatory that people upgrade their boilers and heating controls," said Pindus.

Michael Printz, the Rent Stabilization Association's (RSA) director of marketing and sales, said "Any preventative maintenance that improves the efficiency of their equipment is something they should be doing."

Owners can work out a budget agreement or flat billing with their own-oil company, such as Stuyvesant Fuel, or join purchasing plans, such as the one offered to the 25,000 members of the RSA.

The RSA has negotiated with several companies to provide heating oil to its members at a fluctuating price, which avoids the "sticky price syndrome," said Printz. "We've locked in these providers' profit margin, and the price can fluctuate daily as the spot market goes up, but as the market trends downward, that is reflected as well."

There are three variations of fuel oil, said Slattery. The heating oil used by most homeowners is known as No. 2 and traded on the NYMEX (the New York Mercantile Exchange). No. 4 oil is a blend, 65/35 of No. 6 oil and No. 2 oil. This is not produced out of the ground but made afterwards, and while more efficient than No. 2, it is less efficient than No. 6. No. 6, however, requires more equipment maintenance because it is thick, he said.

"We hope the [prices] go down because we are paying double for the same barrel, and it slows down my receivables," said Slattery.