My last post here at Amateur Economists was all about the crazy run-around I experienced trying to get heating oil delivered to our house this summer for the coming winter. We ordered the tank filled in early June; but it was just last week that I finally got a heating oil company to fill our tank. CBS News also ran a special report last week about how the credit crunch in the financial markets is making it difficult for small East Coast oil companies to purchase heating oil for delivery. Subsequently a number of such companies in New England have already gone belly up.

While everyone I called here in Michigan staunchly denied that Mid-west supply problems or credit issues were crimping the availability of heating oil, the fact remains that, for the first time, it took a summer of arguing with various heating oil distributors to get one to finally deliver some to us, even though we were prepared to pay for it in full (and did). This is very unusual, since in the past these companies have always been anxious to deliver oil out of season, and even offer a discount for ordering it early.

Those days appear to be past.

Last winter it cost us about $2300 to heat a 1000 square foot, well insulated home with our oil burning furnace, and the cost per gallon is higher this year, even now. So we decided to research alternative ways of heating our home without committing to any one particular plan. After getting prices and reading up on all sorts of heating methods, we decided to buy a wood pellet stove.

Wood pellet stoves burn much cleaner than wood stoves. They make so little ash that they can be vented directly outside via a three inch pipe, much like a clothes dryer. They do not require a chimney and they do not build up dangerous creosote. The wood pellets are relatively cheap (currently about $350 for a pallet of bags that will keep a home this size heated all winter), and save the homeowner from constant scrounging for wood and the labor involved in splitting and storing wood.

Best of all, wood pellets are made from waste wood and sawdust that is compressed to remove all the moisture, so no trees are destroyed solely for the purpose of fueling pellet stoves. This is wood and wood products that would be thrown away anyway, and the burn is so clean it produces very little smoke. Some pellet stoves will also burn dried corn. Others will burn switchgrass pellets. So basically, the energy source is almost completely renewable.

One drawback: Because the pellets are fed into the burner from a hopper electronically, a small amount of electricity is needed to run the stove. This means that if you plan to rely heavily on a pellet stove, you want to make sure you have a back-up generator or another source of heat, just in case the electricity goes out.

We found a pellet stove for $1100. The installation will run about $400, and the pellets for the winter between $350 and $500. This means we will completely recoup our investment our very first winter, and we do have a full tank of oil and a working oil furnace that we can use for back up if necessary. Speaking with friends who actually live in larger homes and have used pellet stoves for several years, we discovered they rarely needed to use their original source of heat (the furnace). The pellet stove was sufficient.

So far, so good. But consider this: Almost every place we went to look at these stoves had a story to tell. The first store manager told us that last year he sold two pellet stoves in July. This July he sold 46. The next two places we visited have been unable to obtain the stoves for months and have tons on backorder. Three stores told us the stoves are no longer available from East Coast distributors, but some Mid-west distributors still have them in stock. We felt lucky to find a company that did have some still available for delivery. Ours should be here in about five days.

An article in the New York Times explains that even though oil companies made record profits this year, all of them are having supply problems due to geopolitical issues. U.S. oil supplies have been dropping for five consecutive quarters now, with the most recent quarterly drop being the steepest of all.

Western oil corporations deny vehemently that the scary “peak oil” scenario is responsible for this decline. Instead, they refer to “geopolitical peak oil”; which means that countries like Venezuela, Russia, and Iraq want to keep their oil profits in their own nations, even if it means having to develop the oil fields themselves and shut out multinational oil corporations.

It is completely understandable why developing nations would want to nationalize their oil profits. What is somewhat harder (for me) to understand is why our own government isn’t addressing what could turn out to be a real crisis here in the U.S. should we get hit with a very cold or severe winter.

Last winter, in the Michigan city in which I live, an elderly woman froze to death in her own home because the only disconnect notice legally required of the utility company was a warning flier tucked in her front door. It was still tucked in her front door when relatives found her body. She had been dead of exposure for several days. Family members said she was probably embarrassed to ask for help.

Related posts:

1. Home Heating Oil Companies Can No Longer Provide Their Basic Service
2. Credit Crunch Hits Consumer Credit Cards with American Express’ New Policy
3. Why Federal Home Loan Banks May Survive the Credit Crisis
4. Third Round Of Gold Upleg Ready To Start
5. Home Prices Continue Seasonal Improvement