Have you ever heard the expression, we all live in our own little world? Well, I’m sitting here in mine, looking at deer on the front lawn and wondering whatever happened to ‘conservation” and the ‘retrofit?” I don’t know, maybe I’m just crazy, but are you really pleased with the number of oilburners you sold this past year? If you’re not, what are you doing about it?
Do you really believe that biofuels are the way of the future? I fear that for many it’s just a way to hang on to those precious gallons. Does it really make sense to you to burn the same amount of fuel and have the price of soybeans, wheat and corn and most everything we eat increase in price to heat our homes and businesses? True, we need renewable energy sources and need to curb greenhouse gases and to those who truly believe my apologies, but I’m just not sure bio is the way to go. But, oilmen do love their gallons and that’s what scares me.
It is true that there is a lot of turmoil in the market ‘that hedge managers and bankers don’t belong in the oil industry and of course there are lots of opinions, but let’s go back to the future. The oil industry was faced with a lot of decisions, terrible decisions for management and industry survival, in the 1970s. Yet, one thing that pulled us through above all of the others was conservation. It truly helped us survive and the federal government so believed in it they funded the program to help us learn how to change our ways ‘the Retrofit Program. You can read more about it in my book, Advanced Residential Oilburners. The Feds taught us to say the words ‘retrofit” and ‘conservation” but now you almost never hear the words. For those of you wondering what is a retrofit ‘ it’s the 1970’s way of saying ‘burner sales.”
Imagine it’s 1947, just after the Second World War. Many new tract homes are being built and many of the older ones are being converted to oil from coal ‘ retrofit! The burner companies are building burners again and not working on war production.
So, it’s 1947, the year of my birth, but just a few short 20 years later this baby boomer found himself working on many of the burners that were installed in 1947. In 1967 we were trying to convince people to stay with the old burner. What the heck, it ran, it burned oil and oil was cheap at 17.5 cents per gallon. The industry still had 78 percent market share, so why replace that 20 year old Delco, Electrol, Gould, Silent-Glow, Timken, Winkler, Williams or Zenith. What the heck, it was 100 percent efficient ‘it didn’t burn any oil when it was off and it burned every drop that ever went through it when it was on. Right?
Oh-oh, it’s now 1973 and the excrement hits the blower. Hello OPEC! The first oil embargo (shortage), remember that? Prices jump as high as 50 cents a gallon and people are not that happy with oilheat anymore. That old reliable oilburner is now a pig! It’s no longer costing $262.50 a year to buy those 1,500 gallons of oil; it’s now costing $750.00! Retrofit.
Put in a new burner and get that consumption down to $637.50 a year. Now we’re talking, a ‘pay-back,” another term of the conservation movement. Now it costs only $280.00 to do a push-pull retrofit burner and after that, it’s money in the bank! Did gas conversions increase? A little bit, but it was slowed right down by the retrofit and conservation. In fact, I don’t remember it being as bad as the fear we currently have of facing the big blue dragon now.
Now imagine it’s 1978. The second crunch and oil hits a high of $1.50 a gallon. That oil bill of $637.50 for 1,275 gallons of oil per year has now jumped up to $1,912.50. Solution ‘ retrofit.
This time we even get help from a federal program straight out of the new Department of Energy. Remember that and what’s the program called? Retrofit! We install a new boiler or furnace and the annual oil bill drops to $1,147.50 and we keep the big blue dragon away from the door again. We also go on a rampage selling clock thermostats, Enertrols, Master-Minds, and stack dampers and doing everything we can to help the customer be happy with oilheat. With all those goodies, some new insulation and windows and oil at a buck a gallon, we now have that oil bill down to $650.00 a year. Besides, when was the last time you sold an Enertrol? Does it seem that we stopped pushing ‘retrofits” overnight? Yeah, but in 1982 we sold more oilburners than ever, and that was 26 years ago!
The slow death, for the equipment side of the business, seems to have started just a few years ago as the price of oil went back down below a dollar a gallon. What the heck, it runs, it burns oil, oil is still cheaper than gas and oil still has 44 percent of market share. Sound familiar? Is this industry really proud of that 34 percent loss in just a few years? Boy, I hope not, or we really are messed up because many experts today feel that our market share is less than 25 percent!
Every oil burner manufacturer marketing in this country has a burner model that is newer and probably technically superior to the burner they were selling in 1982. Although I’ve been a believer in lo-hi-lo firing my entire career, only one company made a residential model and sold it in the U.S. until this year. The Riello 40G51 is sold in the Thermo Pride furnace, but now Carlin has entered the market and we’ll see what happens. I learned that modulation and step firing worked while in the U.S. Air Force and I’ve been lucky to have one in my home since 1985, but again will oilmen still count gallons or switch to counting fill pipes? I truly believe that the fuel suppliers that will survive will be the companies that have the customers and again I’ve believed that since 1975. The survivors will pump the gallons, but the old thinking is not what we’re use to.
The important point to ponder is when is the last time you put in a really new burner design? Have you ever put in an NX, an EZ1 or a Model 40? You say that you never have, you just keep selling the same burner you always have. Bingo, and shame on you, no more gripping about your account losses, they’re your own fault!
So now maybe I got you mad, and I guess you’re going to try to convince me that the same customer, who you told in 1982 that his or her 10 year old Shellhead was obsolete and that you replaced, is forever in love with you. Yeah, right! That 10-year old Shellhead never had anything done to it but an annual tune-up and on top of that, it was quiet! Now those 1982 era high speed, flame-retention head burners that replaced those Shellheads just turned 26 years old and you believe that they are going to last forever and you even sell service contacts to keep this urban legend going.
Old equipment doesn’t make your customer warm and fuzzy; it creates a breeding ground for conversions. And besides, what’s the sense in replacing it? It’s just like a new one you would sell them anyway. And you believe that trying to sell new equipment will drive them to gas. And you believe that they wouldn’t even think about putting in a new high efficiency gas unit. And you don’t believe that replacing that 26 year old burner in that 66 year old boiler will lead to higher efficiency levels. And do you really believe that your customers are really that stupid? Well, if you do, then that big blue dragon is going to get you! Can you say retrofit?
Look, it’s up to this industry to save itself. The manufacturers have nothing to lose; they will just change their production to something else, like toasters or can openers or they may even decide to build more gas burners, boilers and furnaces. Many of them just may give up on us and go and work on the Chinese market which is the fastest growing and what will be the largest market in the world. The gas and electric utilities are not going to help you, they want your business! Nope, it’s up to you, convince your customer you care and sell them new equipment fast, because if you don’t, someone else will and we may all lose the account forever. Keep in mind that as I write this article in many places those 1,500 gallons now costs over $6,000.00, what would you do if you thought your fuel supplier just wanted to keep selling you gallons?
A few quick facts: this industry was started by retrofits from coal. In the late 1970s and early 1980s retrofits and conservation slowed erosion of the customer base. In most cases homeowners with new burners, 10 years old or less, don’t convert to gas. Biofuels may burn cleaner and pollute less, but they still keep the gallons flowing. Those are the facts, just the truth and just one more fact. This one is about the Europeans.
The European market revolves around a 10 year life span for burners, furnaces and boilers and their oil and equipment industries are doing just fine. Most companies, and this is a general rule, introduce, promote and market a new design at least every 10 years! Riello has had a new design for almost 10 years, the Gulliver. They’re afraid to bring it here for fear of us Yankee Oilmen yelling at them for changing everything (for the better, I might add). Oh, and by the way, all of this is done with just a one year warranty for the most part. The Europeans don’t try to convince people with a lot of long and prorated warranties that lead people to believe that the stuff will last forever, because you know what? It doesn’t!
As I said, I’m just sitting here at my computer thinking into the keyboard. These are just my crazy opinions again, but they work. I’m not worried about a lot of conversions coming up this year, thankfully money is tight. I’m more worried about when the money starts to flow again. History has a nasty way of repeating itself. By the way, I wrote most of this article in 1994, only the comments about biofuels and two-stage burners are new, makes you wonder don’t it? Just think about it.
George Lanthier is the owner of Firedragon Enterprises, a teaching, publishing and consulting firm. He can be reached at 608 Moose Hill Rd., Leicester, MA, 01524. His phone is 508-421-3490 and his website is at www.FiredragonEnt.com