Why Heating Oil Prices Are Impossible to Predict
It’s a question we get asked every year: “How much will I pay for my heating oil?” Although we hate to admit it, the honest answer is “we just don’t know.”
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, which makes price prediction next to impossible.
To give you some sense of how complicated the heating oil pricing equation is, here’s a short summary of the major factors that contribute to it:
- Crude oil pricing – The price of crude oil is the most important heating oil pricing factor. 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.
- Weather – U.S. heating oil prices are typically driven by homes in the Northeast, which consume about 90 percent of the heating oil used domestically. If we have a relatively mild winter, heating oil prices don’t vary much; they may even go down. In a cold or changeable winter, however, prices almost always rise (as we saw in 2017/18).
- Location – If you live in an area with many heating oil companies (as we do here in New York), they’re more likely to compete for your business. If you don’t, you will probably pay more. Access to shipping ports will also affect pricing.
- Government policy – New laws can encourage or inhibit the use of home heating oil. If oil demand is expected to decline as the result of a new policy, heating oil prices will probably increase as refineries cut production.
- Access to fuel alternatives – When prices rise on alternative fuels (such as natural gas), many homes switch to heating oil as an old standby; this increase in demand will usually drive up oil prices in the short- or medium-term.
As you can see, with so many variables in play it’s not easy to predict where heating oil prices might go here in Long Island – which is a big reason why we offer a Heating Oil Price Protection Program that will help you cope with the volatility. With price protection, you’ll never pay more for your oil than your contracted price, no matter how high world oil prices go – and when the market falls below your contracted price, you’ll pay the lower amount.
While we can’t predict the price of heating oil, we can guarantee you’ll get fair pricing on every gallon of heating oil you buy from us. Why not become a Southville customer today and see for yourself?
