Wednesday, 22nd February 2017
You’ve no doubt noticed that the price of heating oil has risen lately. You’re not alone. Latest statistics will tell you that on average homeowners will have paid 33% more for every litre of heating oil this January compared with the same time last year. Moreover, with prices often changing on a daily basis, it is becoming more and more difficult to predict just how much you’re likely to pay for your oil.
At WP Heating, our customers often ask us why heating oil prices are so unpredictable. Unfortunately, there’s no simple answer to this question. There are a wide number of factors which can contribute to the price of your heating oil. Some of which can be predicted, some of which can’t!
So, just what are the factors that cause your heating oil price to change?..
In essence, the fluctuations in the price you pay for your home heating oil is a classic case of supply and demand. Providing the crude oil market is stable (we’ll tackle that one later..!), heating oil prices generally tend to rise during the winter when the national demand is higher, while summer months tend to bring lower prices.
Similarly, in adverse weather conditions demand is likely to rise and, subsequently, so too are heating oil prices. This is not only caused by homeowners turning up their heating during a particularly cold spell, but a bout of extreme weather can impact upon the logistics (and cost) of distribution – meaning that prices will likely rise in affected regions. So far, so unsurprising!
Global oil supply
The above two factors seem to back up the age-old belief that it is better to bulk buy heating oil during the summer in preparation for when the demand – and price – spikes when the winter draws in. If only it were that simple…
The price of heating oil in the UK is directly correlated to the state of the global crude oil market. Global production decreases or supply shortages will see prices rise if the demand remains constant. For example, political disruption or civil unrest in oil producing countries can result in rising costs at home in the UK – as demonstrated by July 2013’s uncharacteristic price hike.
Currency exchange rate
Oil is traded internationally in US Dollars. This means that the strength of the pound against the dollar will also have an impact upon the price of heating your home.
But why are some suppliers unaffected by all this?..
With so many different factors affecting the oil market, fluctuations in the price of heating oil are unavoidable. So why do some suppliers seem unaffected?
Some oil providers will buy heating oil in bulk and retain this stock until it is sold – often enabling them to offer below-market rates during price hikes. This may seem like the perfect solution for avoiding the erratic nature of the heating oil market. However, this is likely to prove less than cost-effective for the homeowner in the long-run. When oil is stored for extended periods of time, it becomes vulnerable to contamination, which significantly reduces oil efficiency. This means that, although you may have avoided that unexpected price hike, you could end up paying more to heat your home in the long run!
It’s also worth mentioning that bulk buying oil only benefits suppliers when the market is rising. If the market drops, they are then left with more expensive oil to sell before they can re-stock to sell product in line with current prices.
If you want to keep in touch with current prices, feel free to give the WP Heating team a call for a quote – even if you’re not ready to order, the team can provide you with a brief update of current market trends to save you from any potential surprises – we’re all friendly here!