What Causes Changes in the Price of Heating Oil?
Posted: March 4, 2019
If you have been a heating oil customer for a while, you have probably noticed that the price of heating oil can fluctuate quite a bit from season to season and year to year. The question is, why does that happen?
Here are five of the more important reasons why heating oil price is so variable:
- Global market forces – As much as three-quarters of the cost of home heating oil can be attributed to the price of crude oil – a commodity traded on global markets and subject to a number of complex and always-changing pricing factors.
- Changeable northeastern weather – About 90 percent of the heating oil used in the U.S. is consumed right here in the Northeast, where weather (as we know) can shift radically from one year to the next (remember all that snow we got last year?). In a warmer than average winter, heating oil prices might drop; in a colder than average winter, demand will drive up the price of oil.
- The presence (or absence) of competition – The number of heating oil companies operating in an area will affect the price of the fuel; if you live in an area with many heating oil supplier options (as we do here in Rhode Island), price tends to be lower.
- Changes in the political climate – Government policies can be designed to encourage or minimize the use home heating oil; if heating oil production is expected to decline as the result of a new policy, heating oil prices will probably rise as supply diminishes – especially if weather creates a higher demand for fuel.
- Alternative heating options – If the cost of propane and other heating oil alternatives rises, many homes rely more heavily on heating oil; this increase in demand typically drives up oil prices in the short- or medium-term.
The bottom line: there is no foolproof way to predict where heating oil prices might go in Rhode Island – a key reason why we offer heating oil price caps as an option to manage your heating oil costs. Contact us today to find a heating oil pricing program that’s right for you.
Heating oil prices may be unpredictable, but the service and fair pricing you get from Vaughn Oil is a sure thing. Contact us today to become a Vaughn Oil customer and see for yourself!