What do you do when the old rules no longer apply in a market you’ve successfully operated in for 50 years or more? Those are the conditions which Mirabito Fuel Group, Reese-Marshall and Blueox Corporation faced in 2008 when the price of oil went through the roof.
“Volatile with a capital ‘V,’” is how Mirabito Fuel Group President Joe Mirabito describes last year’s energy market.
“2008 was probably the most challenging year our organization ever faced,” said the man whose family has been in the region’s energy business since 1927.
The price of oil had always been based on the basic laws of supply and demand, Mirabito explained. But that changed rapidly when speculators began buying and selling oil futures on the Commodity Futures Exchange.
Within 20 months, the price of a barrel of oil spiked 57 percent, and then dropped 61 percent, he said. And not because of the actual supply of or demand for the commodity itself.
“2008 went against economics 101,” Mirabito said. “There was no transparency in the energy market.” The market’s new-found volatility forced the company president to make tough decisions.
“Our biggest concern was to keep our customers supplied,” he explained. Because high prices in the energy market before had always meant a scarcity of supply, Mirabito made the decision to purchase when oil futures were near their highest.
“We have to balance our supply commitments to our customers with our cost,” he said. While in hindsight this may have meant higher prices for Mirabito customers, he said he is still confident that the choices he made were for the best.
“At the time, we did the right thing,” Mirabito claimed.
The company did what they could to mitigate the effect on its customer base.
“We had to absorb a good share of that,” he said. But they could only absorb so much; the rest fell to consumers.
“We worked really hard to prepare for this winter,” Mirabito said, speaking of the home heating oil portion of the business. The company encouraged its customers to participate in its cap program, which “is supposed to take that volatility out of” the equation, Mirabito explained. According to the CEO, customers who participate in the program are paying only slightly more now than they were at the same time last year.
“We feel good about that,” he said. “You’re always trying to do what is best for your customers.”