What Causes Changes in the Price of Heating Oil?

What Causes Changes in the Price of Heating Oil?


As you have no doubt learned, the price you pay for heating oil can change quite a bit from year to year. Why does that happen? Simple: because the market price of oil is the product of factors that are always changing. This makes it next to impossible to predict which way prices may go.

To give you some sense of how complicated the heating oil pricing equation can be, here’s a short summary of some of the major factors that contribute to it.

Crude Oil

The price of crude oil is the most important heating oil pricing factor. Heating oil, gasoline, diesel and jet fuel are among the many products refined from crude oil. The problem here is that crude oil is a globally traded commodity, which means it is subject to many forces that drive its value up or down.

These forces can include destructive hurricanes that temporarily shut down major refineries. International crises can also have an effect on crude oil production. Although events like these may not actually lead to fuel shortages, prices around the country—including the prices of gasoline, diesel fuel and heating oil—can all rise based on speculation in the stock market about what could happen in the coming weeks and months. This is often referred to as the fear factor.

Winter weather and seasonal demand

U.S. heating oil prices are typically driven by homes in the Northeast, which consume about 90 percent of the heating oil used domestically. In a brutally cold or volatile winter, prices often rise. Also on a local level, operational costs (including overtime) and even competition between dealers can result in price variation.

How your oilheat company can help

Contact your oilheat company to see all they can do for you.