What Affects the Price of Heating Oil?
If you have been an FSi heating oil “Will Call” customer for a while, you have probably noticed that the price of your fuel can fluctuate quite a bit from season to season and year to year. The question is, why does that happen?
Here are five key reasons why heating oil price is so variable:
- Global market forces – The majority 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 Americans use is consumed right here in the Northeast, where weather (as we know all too well here in MA) can shift radically from one year to the next. In a warmer than average winter, heating oil prices might drop; in a colder than average winter, prices will rise.
- Regional 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 Western Massachusetts), price tends to be lower.
- Policy changes – 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.
- The cost of alternatives – 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.
As a result of all these factors (and more), heating oil prices can be pretty unpredictable.
While there is no foolproof way to predict where heating oil prices might go in New England – a key reason why we offer Price Protection Programs like our heating oil pre-buy and price cap options to manage your heating oil costs. You can learn more about the details of these convenient services here.
Not sure if Price Protection is right for you? Contact the heating pros at FSi today to find out!