September 4, 2006
Unite and conquer | Thanks to steadily rising energy prices, oil-buying cooperatives are gaining traction and saving money for Maine consumers
By Chris Churchill
Labor Day, alas, has passed. Warm days are dwindling. And winter will soon slap New England with its icy cold fingers. Snowstorms. Bitter cold. And perhaps most worrisome of all, empty oil tanks needing to be filled.
Scary, no? Yet as energy prices continue to soar, many Mainers are choosing not to face empty oil tanks alone. They're finding there's strength in numbers, that it's easier to slay a dragon with friends on your side of the fight. These Mainers are deciding to join oil-buying groups, or cooperatives.
Cooperative fuel buying is not new. Cities and towns do it. So do school districts, joining together and leveraging the larger size of their buying power to negotiate a better per-gallon price. Consumer-based buying groups, however, have not been as common ˆ but their numbers are on the rise, according to those in the oil business.
And some of these groups can grow quite large. In Caribou, home to horrifying winters, Wilfred Martin in 1991 joined with eight family members and started a oil-buying group. Within a dozen years, his petite group had taken on an impressive sounding name ˆ the Caribou Coalition for Affordable Energy ˆ and had ballooned to 1,000 members.
The group's size has since shrunk to about 800 households and businesses in and around Caribou and Presque Isle, a downsizing Martin attributes to the group's increased selectivity. Still, it's a desirable pool of customers for an oil dealer, especially in lightly populated Aroostook County. And Martin believes those who aren't members sometimes get oil dealers to drop prices by simply suggesting they'll join. "It's a bargaining chip," he says. "We're probably causing prices in our region to drop."
Want to join the coalition? You'll need to live near Presque Isle or Caribou, and you'll need an existing member to recommend you. You'll have to pony up a $12 annual membership fee, and you're required to pass a credit check. "We don't want a company to fail," Martin says, "because we've got people who don't pay their bills."
Once you're an established member, a leadership board elected at an annual meeting will choose the oil dealer and negotiate the price you'll pay over the cold days ahead. This year, the board decided to go with Maine Potato Growers Inc., a Presque-Isle-based oil deliverer, after haggling for a price of 36 cents above what's being charged at the Bangor oil-distribution rack, which, as this issue of Mainebiz went to press, was about $2 per gallon
That variable price, Martin says, allows MPG to turn a profit no matter the price of oil, but still is likely to save coalition members at least 20 cents per gallon. "You have to have oil companies," Martin says. "You can't break them. But we have to protect ourselves here and keep the price down."
The neighborhood effect
Linking with a cooperative can be a boon for oil dealers, if only because they deliver a pool of customers in a particular area. "There are efficiencies that can be created," says Jamie Py, president of the Maine Oil Dealers Association. "You can expand your customer base."
But companies must carefully weigh whether dealing with a cooperative is worth treating one set of customers differently than all of its others. "It's an issue of fairness," says Claudette Townsend, a Scarborough-based district manager for Dead River Co., noting that the company prefers not to have neighboring households paying different prices.
But Dead River Co., Townsend says, works with what seems to be a growing number of buying groups, and is especially eager to work with groups that are geographically clustered ˆ groups that allow, for example, a driver to empty a truck in just one neighborhood. "Sometimes," she says, "a huge group is not as attractive as a smaller group where we can get delivery efficiency."
Another downside of buying groups for oil dealers is that the groups tend to seek new bids each year, meaning an oil dealer may gain their customers ˆ but not have them for long. "We like to have a longer-term relationship with our customers," Townsend says.
One new buying group ˆ Donkey Card ˆ says it has found some oil companies unwilling to service its needs. "Buying groups are all fine and good [with oil dealers] as long as it's church and neighborhood groups," says Jed Rathband, co-founder of the group. "But when you trying to move into the size we want to be, they don't see it as quite as innocuous."
Donkey Card, which takes its name from the long-established symbol of the Democratic Party, is unusual in that it's an oil-buying cooperative with an overtly political agenda.
A for-profit organization, Donkey Card stems from the experience of Rathband and co-founder Barry Noble of going door-to-door to drum up votes and hearing that oil costs are a frequent concern for lower-income Mainers. "The Democratic Party comes knocking to get your vote, but they don't do anything else," Rathband, owner of the Portland-based Stone's Throw Consulting, says. "What we're trying to do here is hearken back to a time when you could rely on the party to help you with your needs."
Donkey Card, which is not formally associated with the Democratic Party, began a trial run last year in York and Cumberland counties, enrolling about 100 families. This year, its range has grown to include Sagadahoc, Androscoggin and Kennebec counties, and about 550 households have paid the $35 annual enrollment fee. In exchange, members this year received a pre-buy price of $2.449 per gallon.
Rathband and Noble have big plans. They see Donkey Card expanding nationally and using its membership base to force corporate America to charge lower prices on a range of goods, from gasoline to food. "Oil is just the compelling event to get people thinking about collective bargaining power," says Rathband, "and that's what Donkey Card exists for."
The change-the-world ambition exhibited by Donkey Card is unique. Most oil-buying co-ops have much simpler purpose: save a few bucks. That's why Episcopal churches on Mount Desert Island banded together for oil purchasing. Ted Bromage, a Somesville resident who organized the group, says the effort is paying off, though he declines to say what price the churches have negotiated. He's considering expanding the program to include local churches of other denominations.
Likewise, Annette McKay of Westbrook has seen growth at her oil-buying group, which she started about eight years ago and laughingly dubs "the Moon Moss oil cartel" (McKay recruited many of her fellow employees at Portland law firm Moon, Moss & Shapiro). With about 200 members, her group lacks the organized structure of The Caribou Coalition for Affordable Energy. "It's very informal," McKay says. "We're just doing it so everybody can get a good price." The year's negotiated price, she adds, is $2.445 per gallon with Irving Oil Co.
With the rise in energy costs expected to continue, some predict more Mainers will band together in efforts to get a good price. "I think you're going to see a lot of co-ops come into being in the next six months," Martin says. "This oil shock hasn't hit us yet."
Scary, no? Yet as energy prices continue to soar, many Mainers are choosing not to face empty oil tanks alone. They're finding there's strength in numbers, that it's easier to slay a dragon with friends on your side of the fight. These Mainers are deciding to join oil-buying groups, or cooperatives.
Cooperative fuel buying is not new. Cities and towns do it. So do school districts, joining together and leveraging the larger size of their buying power to negotiate a better per-gallon price. Consumer-based buying groups, however, have not been as common ˆ but their numbers are on the rise, according to those in the oil business.
And some of these groups can grow quite large. In Caribou, home to horrifying winters, Wilfred Martin in 1991 joined with eight family members and started a oil-buying group. Within a dozen years, his petite group had taken on an impressive sounding name ˆ the Caribou Coalition for Affordable Energy ˆ and had ballooned to 1,000 members.
The group's size has since shrunk to about 800 households and businesses in and around Caribou and Presque Isle, a downsizing Martin attributes to the group's increased selectivity. Still, it's a desirable pool of customers for an oil dealer, especially in lightly populated Aroostook County. And Martin believes those who aren't members sometimes get oil dealers to drop prices by simply suggesting they'll join. "It's a bargaining chip," he says. "We're probably causing prices in our region to drop."
Want to join the coalition? You'll need to live near Presque Isle or Caribou, and you'll need an existing member to recommend you. You'll have to pony up a $12 annual membership fee, and you're required to pass a credit check. "We don't want a company to fail," Martin says, "because we've got people who don't pay their bills."
Once you're an established member, a leadership board elected at an annual meeting will choose the oil dealer and negotiate the price you'll pay over the cold days ahead. This year, the board decided to go with Maine Potato Growers Inc., a Presque-Isle-based oil deliverer, after haggling for a price of 36 cents above what's being charged at the Bangor oil-distribution rack, which, as this issue of Mainebiz went to press, was about $2 per gallon
That variable price, Martin says, allows MPG to turn a profit no matter the price of oil, but still is likely to save coalition members at least 20 cents per gallon. "You have to have oil companies," Martin says. "You can't break them. But we have to protect ourselves here and keep the price down."
The neighborhood effect
Linking with a cooperative can be a boon for oil dealers, if only because they deliver a pool of customers in a particular area. "There are efficiencies that can be created," says Jamie Py, president of the Maine Oil Dealers Association. "You can expand your customer base."
But companies must carefully weigh whether dealing with a cooperative is worth treating one set of customers differently than all of its others. "It's an issue of fairness," says Claudette Townsend, a Scarborough-based district manager for Dead River Co., noting that the company prefers not to have neighboring households paying different prices.
But Dead River Co., Townsend says, works with what seems to be a growing number of buying groups, and is especially eager to work with groups that are geographically clustered ˆ groups that allow, for example, a driver to empty a truck in just one neighborhood. "Sometimes," she says, "a huge group is not as attractive as a smaller group where we can get delivery efficiency."
Another downside of buying groups for oil dealers is that the groups tend to seek new bids each year, meaning an oil dealer may gain their customers ˆ but not have them for long. "We like to have a longer-term relationship with our customers," Townsend says.
One new buying group ˆ Donkey Card ˆ says it has found some oil companies unwilling to service its needs. "Buying groups are all fine and good [with oil dealers] as long as it's church and neighborhood groups," says Jed Rathband, co-founder of the group. "But when you trying to move into the size we want to be, they don't see it as quite as innocuous."
Donkey Card, which takes its name from the long-established symbol of the Democratic Party, is unusual in that it's an oil-buying cooperative with an overtly political agenda.
A for-profit organization, Donkey Card stems from the experience of Rathband and co-founder Barry Noble of going door-to-door to drum up votes and hearing that oil costs are a frequent concern for lower-income Mainers. "The Democratic Party comes knocking to get your vote, but they don't do anything else," Rathband, owner of the Portland-based Stone's Throw Consulting, says. "What we're trying to do here is hearken back to a time when you could rely on the party to help you with your needs."
Donkey Card, which is not formally associated with the Democratic Party, began a trial run last year in York and Cumberland counties, enrolling about 100 families. This year, its range has grown to include Sagadahoc, Androscoggin and Kennebec counties, and about 550 households have paid the $35 annual enrollment fee. In exchange, members this year received a pre-buy price of $2.449 per gallon.
Rathband and Noble have big plans. They see Donkey Card expanding nationally and using its membership base to force corporate America to charge lower prices on a range of goods, from gasoline to food. "Oil is just the compelling event to get people thinking about collective bargaining power," says Rathband, "and that's what Donkey Card exists for."
The change-the-world ambition exhibited by Donkey Card is unique. Most oil-buying co-ops have much simpler purpose: save a few bucks. That's why Episcopal churches on Mount Desert Island banded together for oil purchasing. Ted Bromage, a Somesville resident who organized the group, says the effort is paying off, though he declines to say what price the churches have negotiated. He's considering expanding the program to include local churches of other denominations.
Likewise, Annette McKay of Westbrook has seen growth at her oil-buying group, which she started about eight years ago and laughingly dubs "the Moon Moss oil cartel" (McKay recruited many of her fellow employees at Portland law firm Moon, Moss & Shapiro). With about 200 members, her group lacks the organized structure of The Caribou Coalition for Affordable Energy. "It's very informal," McKay says. "We're just doing it so everybody can get a good price." The year's negotiated price, she adds, is $2.445 per gallon with Irving Oil Co.
With the rise in energy costs expected to continue, some predict more Mainers will band together in efforts to get a good price. "I think you're going to see a lot of co-ops come into being in the next six months," Martin says. "This oil shock hasn't hit us yet."
Mainebiz web partners
Most Recent
Most Recent
Comments