What Influences Heating Oil Prices?

Written on: April 26, 2023

A Look Back at the Price Rollercoaster We’ve Been On

oilheat prices hudson valley ny While your Hudson Valley heating oil company cannot control what happens with oil prices on the global market, we can give you some understanding about why heating oil prices rise and fall on a steady basis.

It starts with the price of crude oil, which is usually the most important factor in the pricing of heating oil. Like gasoline and jet fuel, heating oil is just one of the many products refined from crude oil. Crude oil is a globally traded commodity which means that it is subject to many forces that drive its value up or down.

The War in Ukraine

Even before Russia invaded Ukraine in February 2022, energy prices were increasing in anticipation of sanctions on the Russian energy sector. Russia is the world’s third-largest petroleum and liquid fuels producer. It is also the second-largest producer of natural gas.

Even the possibility of a big disruption in the vital energy supply chain heavily influences the buying and selling done by commodities traders. A Wall Street burst of trading activity caused energy prices to rise based on speculation in the stock market about what could happen in the coming weeks and months if sanctions were imposed on Russia. This is often referred to as the fear factor.

After Russia eventually invaded, the U.S. and other countries placed bans on Russian imported oil and other energy products. It left a big void to fill. And as you know by now, energy prices soared even higher as a result.

Supply and Demand Issues

Before the uncertainty created by the Ukraine war, oil prices had fluctuated because of COVID-19. In spring 2020, crude oil prices plummeted when economies locked down across the globe. Production virtually ground to a halt.

Another supply-demand issue has centered on diminished refinery production, especially as demand increased as COVID-19 cases started to decrease. Over the last several years, 5% of U.S. refinery capacity, along with 6% percent of European refinery capacity, has been shut down. A few refineries closed or scaled back because of the collapse in energy demand in the early months of the COVID-19 pandemic.

Some older refineries were shut down because they were inefficient, and their profits weren’t large enough for Wall Street investors. Other refineries were closed so that their owners could convert them to produce biofuels.*

Seasonal Demand, Operating Costs and the Weather

U.S. heating-oil prices are typically driven by the use of oil in homes in the Northeast, which consume about 90% of the heating oil used in the nation. In a brutally cold winter, prices often rise. Labor costs, transportation, and storage costs contribute to the price of heating oil just as they do for other businesses and industries. For example, when gasoline prices rise, heating oil suppliers must pay more both to get heating oil supplies delivered to them, and to run the trucks that deliver to their customers.

Reliable Heating Oil Service in the Hudson Valley

A full-service heating oil company not only has access to a secure supply of fuel and well-maintained trucks to deliver it, it also has a staff large enough – or expert partnerships with service companies – to provide excellent customer service and the technical expertise to keep you warm and comfortable when the weather gets cold in the Hudson Valley.

For starters, your heating oil company can give you peace of mind by provide automatic heating oil deliveries. Your heating oil company can track your fuel use and make a delivery when you’re getting low.

There is no need to schedule and wait for deliveries, and you’ll avoid the expense and hassle of having your oil heat system tested and primed for restart—something that is required after a fuel run-out. There is no extra charge to be on an automatic delivery schedule.

Reach out to a full-service heating oil company in the Hudson Valley.

*Source: NY Times, 11-10-22