Fluctuating Oil Prices: What Are The Causes?
What Causes Heating Oil Prices to Fluctuate?
One of the realities of heating oil is its fluctuating price. Paid by consumers who use it for different purposes, the prices can vary over time, and there are several factors that contribute to it, including the area or where the consumer lives. Sometimes, there’s affordable heating oil, and sometimes the price can be outrageously high.
So basically, prices for heating oil can dramatically change for a wide range of reasons, including:
1. Demand for heating oil. In the event that crude oil prices are stable, there’s a good chance that home heating oil prices increase during the winter season. The reason for this is because the demand is at its highest level. This is especially true to homeowners and building owners in the Northeast.
2. Changes in crude oil costs. Remember that the cost of crude oil is a major determining factor for the price of heating oil. In turn, crude oil prices are traditionally determined and influenced by the international supply and demand for it. While demand is influenced by factors like the economy and weather, supply on the other hand is primarily influenced by politics, especially with the hands of the Organization of the Petroleum Exporting Countries at the driver’s seat.
3. Local market competition. This is where local heating oil delivery companies come in. The number of heating oil delivery companies in the city, town, region, or state will definitely affect the level of price competition. Likewise, the competitive differences can be substantially felt in areas where there are only very few heating oil service providers. Therefore, it is correct to assume that consumers residing in rural areas are expected to pay higher prices to get heating oil because the supply is being dominated by only a few companies.
4. Regional operating costs. Heating oil prices are also going to be affected by the cost of delivering it to remote and distant locations. Likewise, the cost of doing business can change and differ based on the area of the country where the company is located.
How about the surge in heating oil prices? What causes it?
There are scenarios when home heating oil prices change dramatically. The causes are beyond the control of anyone, though. Provided dealers and consumers have enough supply and temperatures don’t drop or perhaps crude oil prices are stable, then it would suggest that retail prices will be steady. But the moment a severe winter season arrives, the prices are expected to increase and eventually impact demand and supply, too. In a typical harsh winter, consumers will need more heating oil and the situation is aggravated by the interruption of delivery due to the weather.
Finally, during the cold weather, the stored heating oil is going to be used faster compared to the level of replenishing it. Refineries will soon become unable to keep up with the demand and these two become pretty good reasons for heating oil prices to suddenly surge.[/vc_column_text][/vc_column][vc_column width=”1/6″][/vc_column][/vc_row]
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