April 15, 2020

What factors affect the price of heating oil?

It seems like oil prices are always changing and knowing what influences heating oil prices can be one of your best ways to plan a winter budget that keeps your home warm and your wallet happy. Many local and international forces that come into play when suppliers set the price you’ll pay for oil. So you won’t always know what to expect when you get gas for your car or order heating oil for your home.

During the Winter of 2008, heating oil bounced around $3 to $4 per gallon while in 2016 it was around $2 per gallon. With fluctuating prices, it can make it very hard to budget for home heating expenses.

Whether you use oil to heat your home or not, all Americans are affected by oil in one-way shape or form, yet many do not understand how oil prices change. The economics of oil prices is a complex subject because many different factors contribute to price fluctuations and you’ve probably noticed that heating oil prices can not only change from season to season but also year to year. So, why does this happen?

Here are some of the most common and important factors that affect the price of oil:

Global market forces – More than two-thirds of the cost of home heating oil can be attributed to the price of crude oil which is traded on a global market and subject to several complex and always-changing pricing factors.

Changing Northeast weather  – The Northeast region of the United States consumes about 90 percent of the heating oil. Since the weather can be ever-changing and unpredictable, it affects the price based on supply and demand – during a warmer than average fall/winter, heating oil prices might drop; in a colder than average heating season, prices will rise. Simple economics.

Competition – The number of heating oil providers in an area will affect the price of the oil. If you live in an area that’s saturated with oil suppliers, then that will affect the price due to competition among the companies. An area that has little competition may see higher prices since they aren’t competing with other companies.

Policy/government changes – The prices on heating oil are directly affected by energy policies that are put into place. If the production of heating oil is expected to decline due to a new policy, then prices of oil will typically rise due to less supply being available, especially if it’s during the winter season.

Regional cost –  The cost to deliver heating oil can affect the price that you’ll pay. If your supplier has to pay extra for delivery, this will most likely get passed on to you, the consumer. The cost of doing business can vary substantially depending on the area of the country where the dealer is located.

As you can see, a lot of unknowns enter the heating oil pricing equation – which makes it easy to understand why heating oil prices can be so unpredictable. Call us for today’s oil price.

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