Home Heating Oil Prices

Out of the millions of residents in the United States, there are over 8 million homes that utilize heating oil as the primary method of heating. A product of crude oil, home heating oil is subject to sometimes drastic changes in price, much like any other petroleum product. This constant flux makes it hard for consumers to predict what their heating costs will be. Read on to find out more about the nature of home heating oil prices!

Understanding Heating Oil

The price of heating oil depends on a number of variables, making prices subject to constant ups and downs. These include several market conditions such as crude oil, gasoline and seasonal demand.

Crude Oil and Gasoline

Heating oil, just like gasoline, starts out as crude oil. Because home heating oil comes from refined crude oil, the price of crude oil largely affects the price of home heating oil. If crude oil prices are high, the price of heating oil will be high as well. Depending on the demand of gasoline or other petroleum products, this could change how much home heating oil is refined in preparation for the winter.

About one fourth of all crude oil is refined into heating oil, while about half of all crude oil becomes gasoline. This means that the price of gasoline at the pump affects the price of heating oil as well. If refiners see a bigger benefit in producing more gasoline instead of heating oil because of perceived higher profits (such as when gasoline prices are high), this can lead to a shortage of home heating oil. Some years, when the winter cold comes on fast and strong, a spike will rise in demand. If supplies are low, the prices go up as the demand increases.

Seasonality

The majority of heating oil is used from October through March, during the colder months of the year. Because petroleum products such as kerosene, plastics, gasoline and heating oil are distilled and separated by their boiling points, groups of products have to be refined together. The products with similar boiling parts are handled together in bulk. This means that making large reserves of heating oil gets quite costly, because it requires the production of other items that might not be in high demand. Refiners have to choose if it will be profitable enough for them to create all of the products at once. A reserve of heating oil is usually kept for the early winter months, but nothing of significant size that would keep costs down throughout the entire season. If demand becomes suddenly high and supplies are lower than demand, the price could change quickly. As such, prices are lower during the summer and higher during the winter.

Refining and Distribution

The last factors that influence the price of each gallon of home heating oil are refinement and distribution. Refiners have to make the decision of how much home heating oil to produce based on profit. Naturally, there is a cost associated with production at each refinery. In addition, there is also the cost of delivering heating oil to the end consumer, which the distribution companies recoup in the price of the heating oil. When you add the costs of refinement and distribution to the costs of effectively marketing home heating oil as a product, you can see why the price can change so much.

Saving Money on Home Heating Oil

If you want to save money on home heating oil, there are several options available to you. Because there are a number of distributors, it can be tricky to always be sure you're finding the best deal and the lowest heating oil prices around. Here are some tips to help lower your heating bill:

Comparison shop! Enter your address with WhiteFence to see home heating oil prices in your area. You can shop around for better rates to see where you can start saving money immediately on your monthly bill.
Schedule a heating oil tank refill later in the summer, when heating oil is not in quite as much demand. This will help you refill your tank for a much lower cost than it would take if you waited until the first few weeks of winter. While this won't get you through the entire winter, it's a way to delay that initial jump in price.
Change your pricing plan. Many heating oil providers offer price plans that will protect you from seasonal jumps or put a cap on the rate you pay per gallon.
Get a home energy audit. There are a number of ways that your home can be improved from an energy efficiency perspective, especially if your house is older. This includes better windows to keep the cold air outside, better sealing around your doors and taking care of any gaps where cool air can cause the heat to turn on.