Weather More Than Fodder For Talk At Many Credit Unions

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Everyone talks about the weather, but few are watching it more closely than credit union leaders across the upper Midwest and Northeast this year.

With prices for fuel for both vehicles and home heating needs significantly above 2004 levels, analysts within the credit union community are warily watching how fuel-related costs will affect members and their personal finances, and whether it will mean delaying loans for other purchases or needing loans to finance winter-related costs, such as home heating oil.

In North Dakota, 40-degree weather the week before Thanksgiving is very rare, but it has helped by limiting the demand for fuel. Indeed, a relatively mild winter has yet to push home fuel prices up, but credit union officials in this state and others are expecting an increase as winter approaches.

North Dakota Credit Union League President Kermit Larson said he's yet to hear anything from league credit unions reporting problems from their members, but noted local farmers were seeing lower profits due to higher gas prices. "It's going to affect everybody," Larson said.

According to the U.S. Energy Information Administration's (the statistical agency of the Department of Energy) November Short-Term Energy Outlook, the 2005 hurricanes damaged, set adrift or sunk 192 oil and natural gas drilling rigs and producing platforms. As of November 2005, 53% of oil production and 47% of natural gas production is still offline from the Gulf of Mexico. The report further noted that West Texas Intermediate crude oil is expected to average $57 per barrel for 2005 and possibly increase to $65 for 2006.

Energy Information Administration Economist Tancred Lidderdale told The Credit Union Journal the North American climate has been 20% warmer than normal.

"It's a question of how long it will last, the weather and the prices," he said. "January, February, even into March are the critical months."

Lidderdale said ending Nov. 21, 2005, the average price of residential home heating oil was $2.43 versus $2.03 for the same period in 2004.

CU professionals tell The Credit Union Journal they are expecting rising fuels costs, yet even with that expectation, most have yet to establish special loan programs or lines of credit for such needs.

Minnesota Valley Federal Credit Union President Nick Meyer echoed Larson's wait-and-see approach, but also mentioned the state has cheaper gas than many parts of the nation due to gas imports from Canada. Meyer said he thought increasing fuel prices were a topic of conversation among members with possibly "fewer bucks in their wallet, but not affecting their finances." Meyer said last winter, Minnesota Valley FCU had set up a low-rate plan for deferred utility payments, but that few took advantage of the program. "I think two people took us up on it," Meyer said.

Meyer said the local area around Mankota, Minn.-based Minnesota Valley FCU has a stable economy and the "farmers are happy" with good crops of soybean and corn.

Meanwhile, in the Hoosier state, Indiana Members Credit Union President Ron Collier also said he hasn't heard any member grumbling, just yet, and seemed a bit skeptical of predictions there will be a 20% to 30% jump in fuel prices over last year. He noted that he had passed a gas station in Indianapolis that raised fuel prices from $1.98 to $2.08 overnight.

"Now tell me what happened in 12 hours that made that price go up?" he asked.

If there is one change in member behavior, Collier said the applications the credit union has received to finance SUVs has dropped off as members switch to more fuel efficient vehicles.

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