As you no doubt know, the price you pay for your heating oil in Maine can change quite a bit from year to year. Why does that happen?
It’s because the market price of oil is always tied to a variety of factors that are constantly changing. If you would like to view a long-term history of residential heating-oil prices in Maine and see how prices fluctuate, please go here.
As far as the reasons for energy price increases, there are many factors that cause energy prices (crude oil, fuel oil, natural gas, electricity, coal, propane, etc.) to rise and fall. These include:
All of these factors have contributed to the normal trend of ups and downs in the energy markets over the years. It goes without saying that we are in an “up” market right now.
To get a better handle on what’s driving higher heating oil prices, we have to look at what’s happening with crude oil to make the first connection. Gasoline and heating oil, both of which are refined from crude oil, have both risen more than a dollar more per gallon vs. a year ago. As the price of crude oil goes, so goes gasoline, heating oil and many other products derived from it.
In early October, crude oil prices topped $80 per barrel, a benchmark that hadn’t been reached in seven years. That’s quite a jump from April 2020, when crude oil prices hit a rock bottom of $15 per barrel during the early stages of the pandemic. Since then, however, prices have been steadily rising.
But there is good news. In its Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) expects crude oil prices to remain in the $80 range until the end of the year. In 2022, the EIA believes lagging supply will finally overtake demand, leading to a fall in prices.
It’s no surprise that COVID-19 has played a large role in the current state of the market. Demand for oil sunk to deep depths as more countries went into lockdown last year. Global supply became diminished as producers responded by scaling back oil input. Now, with the wide availability of vaccines in most countries, people are traveling again and businesses have opened up. But global supply hasn’t caught up with all of this increased demand. When you match low supply with high demand, prices go up. Of course, this is true for many other commodities, not just for heating fuel. We’re seeing this right now across the board with consumer goods because of supply chain issues.
And then there’s the energy market itself. Right now, Wall Street speculators are not “bullish” on investing in the fossil fuel industry. They’re still skittish about how the crude oil market crashed and burned last year at the beginning of the pandemic.
Do you remember the Spring of 2020, when crude oil prices fell all the way to negative $30 per barrel? Traders had to pay buyers to take oil!
Investors are also holding back as they watch legislators try to move the country toward more renewable energy. By the way, the heating oil industry is making excellent progress with making their fuel more dependent on renewable energy too.
People sometimes misunderstand how negatively higher prices impact local fuel dealers. Heating oil companies don’t make more money when prices rise—they actually make less.
Think of it this way: it’s like when the cost of coffee, milk or orange juice rises. It’s not the local grocery store that is profiting. (That’s left to the Wall Street investors). Heating oil customers have a harder time paying their bills. They reduce expenditures. Heating oil companies may need to tap into their lines of credit more. Phones light up with questions from customers. So the sooner energy prices drop, the happier your heating oil company will be.
In the meantime, please reach out your heating oil supplier to find out ways they may be able to help you reduce your energy costs, or handle payments more easily.
[h3] What You Can Count On
Local, independently owned heating oil companies in Maine work hard to ensure homeowners and businesses in the area get the best prices possible without compromising on quality, safety or environmental concerns. They also ensure you have the heating and home comfort experience you deserve in several other areas as well, regardless of what’s happening in the market.