Heating oil prices in Michigan—and everywhere else—will always ebb and flow because many factors come into play. Everything from the weather to geopolitics can influence the markets and the cost of all energy, including heating oil.
You can view a history of heating oil prices in Michigan here.
Supply and demand will always affect price, but almost as often, we see big hedge funds trade commodities contracts based on what might happen in the energy markets, which can dramatically push prices up and down regardless of supply or demand. This is commonly known as the fear factor.
Once again, we’re seeing heating oil and other energy prices surge across the board. This is not uncommon in the energy markets, which is prone to volatility, but higher prices hurt just the same—especially on top of a still-lingering pandemic.
To get a better handle on what’s driving higher heating oil prices in particular, we have to look at what’s happening with crude oil to make a connection. Gasoline and heating oil, both of which are refined from crude oil, have both risen more than a dollar more per gallon vs. a year ago. As the price of crude oil goes, so goes gasoline, heating oil and many other products derived from it.
In October, the price of crude oil climbed above $80 per barrel, a benchmark that hadn’t been reached in seven years.
In its Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) expects crude oil prices to remain in the $80 range until the end of the year. The good news is that in 2022, the EIA believes lagging supply will finally overtake demand. This should lead to a drop in global crude oil prices.
COVID-19 has played a large role in the current state of the market. Demand for oil sunk to deep depths as more countries went into lockdown. Global supply became diminished as producers responded by scaling back oil input. Now, with the wide availability of vaccines in most countries, people are traveling again and businesses have opened up. But global supply hasn’t caught up with all of this increased demand. When you match low supply with high demand, prices go up. Of course, this is true for many other commodities, not just for heating fuel.
Knowing what drives the price of heating oil, and understanding that it’s more complicated than just competition between local heating fuel dealers, will help you make smart choices. There’s no way to control oil prices affected by the global market, but your heating oil company does offer ways to help give you a bit more certainty.
But people sometimes misunderstand how negatively higher prices impact local fuel dealers. Heating oil companies don’t make more money when prices rise–—they actually make less.
Think of it this way: it’s like when the cost of coffee, milk or orange juice rises. It’s not the local grocery store that is profiting. (That’s left to the Wall Street investors). Heating oil customers have a harder time paying their bills. They reduce expenditures. Heating oil companies may need to tap into their lines of credit more. Phones light up with questions from customers. So the sooner energy prices drop, the happier your heating oil company will be.
In the meantime, please reach out your heating oil supplier to find out ways they may be able to help you reduce your energy costs, or handle payments more easily.
One thing that always pays off no matter whether prices rise or fall is to cut your fuel consumption. There are many ways you can minimize your winter heating bills and maximize your comfort.
Rest assured, your Michigan heating oil supplier will do everything possible to ensure they can make deliveries—no matter the cost or difficulty they face.
Let’s all get through this winter warm and safe and hope for better days—and lower prices—next spring.