A Comprehensive Guide to Heating Oil Prices
When having heating oil is a must, it is important to know where the oil comes from and what aspects affect the prices. Here is more on everything you need to know about heating oil prices.
Heating oil is one of the expenses most people in the New England area face each winter. In fact, in Massachusetts alone:
households often spend a lot of money on heating oil during the winter. According to the state, the average households spent nearly $2,300 on heating oil during the 2017-2018 winter season. That was an increase of 17 percent from the year before.
As you can see from these figures, heating oil prices tend to rise quite a bit from year to year but what causes that to happen? It all starts with where heating oil comes from and a variety of factors that causes prices to fall or rise.
Where Does Heating Oil Come From?
The heating oil you use to heat your home in the winter is created from, or rather refined from, crude oil. We get the final product either imported from other countries or from domestic oil refineries.
Refiners have limitations on the amount of heating oil they can make to meet consumer demand during the winter heating season. Refiners can increase heating oil production in the winter, but that means they also have to produce greater amounts of other petroleum products. If no market exists for larger volumes of other petroleum products, this lack of demand may limit the amount of extra heating oil that they produce. Therefore, some of the heating oil that refiners produce in the summer and autumn is stored for delivery in the winter. During the winter, heating oil suppliers use these stored inventories to help meet demand.
So while some of the heating oil comes from stored inventories mentioned above, other supplies come from imports. For instance, a lot of the east coast inventory comes from Canada.
Delayed Imports and Lower Inventory
Sometimes the inventory for heating oil is lower than usual depending on demand for a seasonal product. A good example is after two major hurricanes - Rita and Katrina. Due to these storms, some of the refineries on the Gulf Coast were shut down, and this caused gasoline prices to soar. So instead of focusing on heating oil production, the refineries focused on gasoline production, causing a shortage for the heating oil season.
This is the same reason you sometimes see gasoline prices rise during the holidays - there is a higher demand for it so refineries focus on gasoline production during that time, which affects seasonal heating oil.
What Factors Affect Heating Oil Prices?
Supply and Demand
One of the biggest factors that affects heating oil prices is supply and demand. For example, you may have noticed that during a major storm that the price of heating oil goes up drastically. This is because this demand for oil depletes the inventory faster than it can be replenished. Another factor is that wholesale buyers may bid up the prices to cover inadequate supplies.
Seasonal Needs
Since heating oil is a seasonal product, this goes back to supply and demand. When the demand is highest, the prices are typically higher as well. This is why that whenever possible, buying heating oil when it is not needed is cheaper than when the winter months have started.
Regional Operating Costs
A factor in the price of heating oil is based on regional operating costs. For instance, if you live in a remote area, it is going to cost the local company more to deliver than if you lived nearby.
Local Market Competition
Along with regional operating costs, local market competition is another element that influences price. The very number of suppliers in an area can make the difference in cost for the consumer. This is true with any type of product - if there is a lot of competition in the area then prices are typically lower. For those in rural areas, the prices may be higher simply due to the lack of competing suppliers of heating oil.
The Varying Cost of Crude Oil
The cost of crude oil is what also affects the cost of your heating oil and this is determined by worldwide supply and demand. What affects supply and demand? It can range from the weather to political climate or even the economy itself. Also, the amount of oil produced by OPEC (Organization of the Petroleum Exporting Countries) affects prices on a global scale.
How Do You Get the Best Price on Heating Oil?
There are quite a few ways to find the best price for heating oil when it is time to fill your tank, or well before it is time. Here are a few tips on finding the lowest price possible:
Fixed or Capped Prices
Some oil delivery companies will offer locked-in pricing which means that the rate does not go up over the time it is locked in - typically a year.
Pre-Buy
By purchasing your heating oil before it is needed, there are often discounts offered. In fact, it makes sense to get what you need early rather than waiting till the last minute when supplies may be harder to find. This also works well because if the oil prices rise, you already have bought it at the lower price.
Market Price
This way of saving money is a little more risky . Much like the stock market, you are dependent upon the market price for the oil. You may save money if you purchase the heating oil on a day where the prices are low.
Combining Orders
One of the best ways and easiest ways to save money is by collaborating with others in your area. The heating oil is bought together as a group so that everyone saves money by getting the lowest price possible.
Slick does this by saving you the work and combining orders of others near you for the lowest heating oil price. This not only eliminates unnecessary delivery fees but it is easy, fast, and saves everyone money.
To get the best prices on your heating oil this year, visit Slick to learn more about how you can save money on every order that you place.