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Common Causes for Fluctuations in Heating Oil Prices

Line graph fluctuation

Understandably, people who heat their homes with oil always have concerns about where heating fuel prices may be headed, especially as we approach wintertime. Yet it’s very difficult to predict which direction prices will go because there are many factors that cause energy prices to rise and fall.

For example, unrest in oil-exporting countries, upcoming U.S. sanctions against Iran that will hamper exports, and other perceived shortages, often related to the weather, all contribute to the “fear factor” for commodities traders. Their actions cause world oil market prices to rise and fall on a daily basis.

Here’s a closer look at some of the variables that can affect the price you pay for your heating fuel.

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—as we saw in the late summer of 2017. 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. As stated before, this is known as the “fear factor.”

Winter weather and seasonal demand

In a brutally cold or volatile winter—like we experienced last year—prices often rise because demand is at its peak and sometimes supply can become strained. On a local level, operational costs (including overtime) and even competition between dealers can result in price variation.

How your oilheat company can help