Home Heating Oil Price Trends Explained
November 5, 2020
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November 12, 2018
Trying to keep up with the many factors that can affect heating oil price trends every year can be daunting, and like a number of fuels, heating oil prices can fluctuate depending on what is going on with the wider market. To help you on your way, we’ll be exploring the variety of factors that cause heating oil prices to fluctuate, so you know when to buy your heating oil to save your hard-earned money.
Home Heating Oil Price Trends
Home heating oil users will need to regularly monitor the cost of their heating oil to ensure that they are getting the best possible price at any one time.
Here are five key factors that can impact the cost of heating oil price trends:
1) Demand from the world’s top oil consumers
Like other industries, the demand for oil affects overall pricing. The United States and China are the top two consumers of oil in the world, and as a result, they both have a huge impact on heating oil price trends. It is suggested that the better an economy is faring in terms of employment levels and house prices etc. the greater the demand for oil and the higher the price that consumers can expect to pay for oil. So it’s no surprise that the oil demand has drastically tumbled due to the COVID-19 pandemic.
According to the BBC, America’s economy has been hit by the biggest economic contraction ever recorded because of the coronavirus, and more than 20 million US citizens have lost their jobs. The USA Energy Information Administration reduced its forecast for 2021 global demand growth by 500,000 barrels per day because of China facing lower consumption growth than originally predicted.
Also, the Organisation of Petroleum Exporting (OPEC) has reduced its yearly forecast to an average of 90.2 million barrels per day in 2020 due to a recovery that has been weaker than expected from Asian countries.
What’s more, in the Middle East, which are some of the largest oil producers in the world, have had to revise their oil demand from countries such as the UK and France by around 100,000 barrels per day due to reduced demand.
The pandemic is undoubtedly a significant global challenge that has triggered huge downturns in the oil market.
2) Exchange Rates
Another heating oil price trend that impacts when to buy heating oil are exchange rates. As oil is traded in US dollars, the value of the pound against the dollar will have a bearing on oil prices (i.e. the stronger the pound, the lower the price you should pay for your home heating oil and vice versa).
According to the Financial Times, when the coronavirus first appeared and stock markets began to plummet in March, global investors quickly turned to the one currency they trusted the most: the dollar. However, a few months after, the US currency hit its lowest point in a decade, showing just how much the US economy has been suffering due to the pandemic.
If there is political unrest in a country or the potential threat of war, consumers may ‘panic buy’ large quantities of oil for fear that it will be hard to access this energy source, if a country slips into disarray.
As there are a number of key oil producers in the Middle East, then any political instability in this region could affect worldwide oil prices. This is another reason why heating oil price trends have experienced turbulence in 2020. There have been rising tensions between the Middle East and the USA after President Trump ordered an airstrike in Iraq. This led to oil jumping to $70 a barrel and could even trigger another Middle East war in the future.
4) Political Turmoil
Oil is rare, unique and is something that plays a major role in practically everyone’s lives. Energy is not an everyday commodity, it is highly political, and wars have even been fought over it. And as governments around the globe have a significant impact on oil reserves and production, political influences affect heating oil price trends and cause oil prices to fluctuate.
An example of a politically-caused disruption in oil production is the 9/11 Attacks in the USA as oil prices briefly shot up. This sudden rise in prices was because of the panic that crude oil imports from the Middle East would stop.
5) Natural Disasters
Natural disasters often affect oil prices because they interfere with production through damaging facilities and temporarily stopping production in that area. Natural disasters also have the potential of damaging the pipelines that form the distribution infrastructure of production.
Sometimes, even just the potential risk of a natural disaster before it has happened can affect when to buy heating oil and oil prices. This is because the potential event creates uncertainty surrounding the future of oil supply and demand, and with uncertainty comes volatility in oil pricing.
Natural disasters can also cut off the oil supply. As an example, in 2005, Hurricane Katrina stopped oil production along the Southern Gulf Coast, sending oil prices soaring.
Hurricane Katrina is one of the most notable natural disasters to affect the price of crude oil. The catastrophic hurricane of 2005 rocked gas and oil prices due to the number of platforms and pipelines that were destroyed during the storm. This decreased production, which lowered the available supply from the affected area.
When Should I Purchase Heating Oil?
A key home heating oil price trend that you should follow is to buy in the summer months. This is the general rule of thumb regarding when to buy heating oil to get the best price, as oil demand is generally lower. For more useful and expert information on when to purchase heating oil to save money, check out our latest blog post.
Despite what’s happening around the globe, you can rely on Rix as a market leader to get the best deal on your home heating oil prices. Contact your local depot today to enquire about our domestic, agricultural or commercial oil services, where a member of our friendly team will be on-hand to offer their wide range of local knowledge that you need from your oil supplier.