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Home Heating Oil Prices

What you need to know about Home Heating Oil Prices

Home heating oil is a petroleum-based product used annually in 8.1 million American households. The number may sound large, but, in fact, there are 107 million American households. That means that nearly one hundred million American families heat their homes with natural gas, not with heating oil.

And yet, the fact that 8.1 million families rely strictly on oil means that each year lots of home heating oil is sold. Generally, the families that use this product live in older, detached single family homes. Everyone else, the rest of the country that uses gas, tends to live in more recently-constructed single family homes, condos, townhomes and other structures.

Home Heating Oil Prices

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As is true for any commercial or retail product or service, the price for home heating oil tends to fluctuate based on a number of factors. The primary factor in determining the retail price of home heating oil is the cost that companies must pay to extract the oil from the ground. That price – the cost of crude oil – helps determine the cost of the refined product – home heating oil

There are other factors, too – the cost of producing the home heating oil; that is, converting it from crude oil to the product that heats the home. This process occurs in a refinery and there are refineries all over the United States. Another cost involves distribution. While refineries are everywhere in the United States, the refined oil still needs to make its way to individual distributors – home heating oil companies.

Distribution can be by rail line … by barge … pipeline … by truck … and by tankers. Most home heating oil is produced domestically, but some of it comes from abroad, Canada, the U.S. Virgin Islands and Venezuela. It costs even more to get that home heating oil to local distributors and that can increase the price consumers pay at the retail level.

There are still other factors that play a role in the ultimate price – at retail – of home heating oil. One is seasonality. Obviously, demand is higher for this product during the colder months of autumn and winter. As a result, prices are higher during those seasons. In spring and summer, there is virtually no need – and no demand – for home heating oil. During these warmer months, people are more interested in air conditioning and the electricity that helps to cool their homes. So … in spring and summer, when demand is low, the price for home heating oil drops precipitously

Supply and demand worldwide for crude oil contributes mightily to the price consumers pay for their home heating oil. When supplies are down, prices go up … obviously. However, there is still one more factor that can help or hurt consumers when they buy home heating oil. That is local competition. There is likely to be several private distributors in your area, small companies that want your business. The greater the competition for your home heating oil budget, the lower the prices that will be offered to you.

Competition always favors the consumer. When it comes to home heating oil, the savings can be significant. Next fall and winter season, “shop the marketplace.” Buy oil from the local distributor who offers you the best deal. You are certain to save money that way, perhaps lots of it.

 

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