It’s certainly one of the primary questions when a homeowner is even considering installing or using an oil heater: how much is this going to cost me? Obviously, the greatest on-going cost for using an oil heater is the price of the heating oil itself. But the good news is that heating oil prices are dropping – and have been on a steady decline for a few years now.
WHY SO DOWN?
There are several reasons for the recent and on-going drop in heating oil prices, and many are tied to a very volatile international situation. To truly understand why prices drop – and conversely why they may rise – let’s look at the global economic structure that sets the rates in the first place.
Supply. Heating oil – like the gasoline you get for your car – is refined from crude oil, which is found in great abundance in foreign lands. These are the same foreign lands that endure great conflict and unrest. Conflict and unrest leads to what is referred to as unplanned production outages and supply disruptions. America has learned its lesson. To rely on foreign oil means putting up with the volatility of the supply – and rising costs. So domestic oil producers have stepped up their efforts to generate supply right here in America. And when domestic supply is high, reliance on foreign oil drops, as do the prices we pay for gasoline at the pumps and for heating oil in the home.
Demand. However, as any amateur or professional economist will tell, there are two sides to any pricing equation: supply and demand. And the fact is that several factors have contributed to a reduction in domestic demand.
- Environmental consciousness
- Efficient driving practices
- More fuel efficient vehicles
- Improved technology that has aided the manufacturing of longer-lasting, longer-burning biofuels
HOW DO HEATING OIL PRICES COMPARE TO GASOLINE PRICES?
Because both gasoline and heating oil are distilled from crude oil, the rise and fall of their prices are usually in close proximity. But they’re not the same. For one thing, the refinery process is different for each, and then there’s the method of delivery. Plus, heating oil is primarily a seasonal product, used mainly in the winter months in cold climate locations. Gasoline is used year-round by everyone. These factors usually result in heating oil prices being slightly higher than prices at the pump. Residents in Northeastern states look at heating oil prices as carefully as they do prices at the gas pump.
HOW LONG WILL THE GOOD TIMES ROLL?
You may be wondering if this good news will continue and for how long. For reasons mentioned above, oil prices will always be volatile. Clifford Krauss of the New York Times shares his belief that “Oil production is not declining fast enough in the United States and other countries, though that could begin to change in 2016.”
PFO, the Trusted Name in Home Heating
Have more questions or concerns about heating oil prices and saving energy costs? Interested in getting the latest information regarding foreign or domestic crude oil markets? Talk to the experts at Princeton Fuel and stay in the know; give us a call at 1-800-253-9001!