As you 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:
Global crude oil prices soared to their highest point in eight years after Russia invaded Ukraine in late February. As you probably know all too well by now, as the price of crude oil goes, so goes gasoline, heating oil and the many other products derived from it.
Prior to this, energy prices in all sectors—oil, propane, natural gas and electricity—had been on a steady rise because global oil production hadn’t yet caught up with the pent-up demand that quickly followed the perceived end of the pandemic.
Even before the war in Ukraine further accelerated price increases, frenetic consumer spending–combined with persistent supply shortages–had sent inflation rates in our country to their highest level in 40 years.
The only good news is that this shocking price spike occurred near the end of winter, instead of the beginning. And it’s also important to point out that for the most part, oil prices have remained fairly stable since 2014. You can view a heating oil price update from the U.S Energy Information Administration by going here.
As was noted before, global crude oil production hasn’t yet caught up with pent-up demand. Unfortunately, a simplified and misinformed solution to the production shortfall that’s regularly offered up by some pundits and politicians in the U.S. is that, “we just have to drill for more oil at home.”
First, even if the U.S. did drill for enough oil and keep it all here to gobble up for ourselves, that crude oil would still be tightly married to the global oil market—and beholden to whatever the world’s highest bidder is willing to pay for it.
This “solution” is also ignoring the fact that right now, oil companies are feeling enormous pressure to give up fast growth in favor of steadier profits and stock-boosting finance moves, such as higher dividends, more share buybacks and reduced debt. Read more about this here.
Investors have also been reading the tea leaves, and realize that a zero-carbon emissions world is not too far off in our future. Big money is holding back on fossil fuel investments as legislators try to move the country toward more renewable energy. Investors instead are looking to sink their money into long-term, profitable opportunities in the burgeoning green energy field. By the way, the heating oil industry is making excellent progress with making our fuel more dependent on renewable energy too. Read about the benefits Bioheat® fuel.
Another factor influencing oil companies is the memory of the breathtaking fall of crude oil prices during the early days of the pandemic. In the Spring of 2020, crude oil prices fell all the way to negative $30 per barrel! Traders had to pay buyers to take oil! Since then, however, prices have been steadily rising before they exploded in late February after the Russian invasion of Ukraine.
Could they drop that far again? Well, by mid-March, crude oil prices had begun to fall–but quickly took a U-turn and went up again as the situation in Ukraine remained unstable and the call for boycotts of Russian energy products picked up steam.
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. 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 short, this is an awful mess for everyone.
In the meantime, please reach out to your heating oil supplier to find out ways they may be able to help you reduce your energy costs, or handle payments more easily.
Local, independently owned full-service 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.
We don’t know where things will go from here, but if history is a guide, we can expect to see prices drop pretty significantly in the not-too-distant future. If you would like to read the U.S. Department of Energy’s short-term energy outlook, please go here.
Nothing will make your local Maine heating oil company happier than when prices return to normal. Until then, trust your heating oil supplier to look out for you and let’s hope that—regardless of what happens with energy prices—we will soon be living in a more peaceful world.