Hey, How Can I Predict Heating Oil Prices?
The secret to predicting heating oil prices is... you can’t.*
It’s a Crude, Crude World.
The fact of the matter is, the price of crude oil accounts for the majority (58%) of the cost of heating oil and therefore drives the price. And you or I have little control over the price of crude. Check out the graph below. Kind of says it all. As crude goes, so does the price of heating oil. The graph is compliments of the US Energy Information Administration.
So what makes the price of crude oil fluctuate so dramatically?
Since crude oil is a commodity it’s essentially just supply and demand. More demand than supply and the price goes up. More supply than demand and the price goes down. So what are the factors influencing crude supply and demand?
More people want more oil
There are a variety of petroleum products made from crude including gasoline, ultra low sulfur distillates (also used for transportation) and jet fuel which together take about 78% of each barrel of crude. Heating oil actually makes up a very small portion of the barrel. So what’s really driving demand for crude is the global economy. The US is the biggest user of energy, but demand has been rapidly increasing in countries who are growing economically like China and India.
[Fun Fact: A barrel of crude oil is a standard unit of measurement equal to 42 liquid gallons.]
OPEC and other reserves determine crude supply
Organization of Petroleum Exporting Countries (OPEC) used to control the pricing across the world, but US production has grown in importance creating additional supply and driving down prices. That’s one big reason we’ve seen heating oil prices (and gasoline prices) decrease in recent years
What else affects the price of heating oil?
When the weather outside is frightful, your furnace can be running non-stop to heat your home which means you’ll need to fill your heating oil tank sooner, as will many of your neighbors in the Northeast. That creates a spike in demand and consequently can drive up prices as companies scramble to meet the demand.
Other weather related conditions can also affect heating oil prices. Snowstorms can slow deliveries. And hurricanes can affect sources of supply.
There are additional factors like economy, the exchange rate, political unrest, new government regulations and more that might have an influence on what you pay for a gallon of heating oil.
If heating oil pricing sounds complicated, well it is.
Sadly, we’re in the heating oil biz and we can’t predict heating oil prices…or airline ticket prices or stock prices. However, we can watch price trends and so can you using our instant price check. You decide the best day to buy. We also track the average heating oil price weekly using the EIA Weekly Price Survey so you can compare the average price of heating oil in Maine or New Hampshire versus Heatable’s price.
Super handy: you can sign up for price alerts that will tell you when the price has made a significant change. Just create and account and check the box letting us know you want to be informed.
Severe weather can also affect heating oil prices. To learn more, check out How Severe Weather Affects Heating Oil Prices.
Learn more about Heating Oil
Visit our Ultimate Consumer’s Guide to Heating Oil for everything you need to know about heating your home with #2 heating oil.
Stay cozy out there!
The Heatable Crew
*Unless you’ve got some super powers we are unaware of...