As Prices Rise, Heating Oil Users Hope Relief Will Come Soon
Here’s the good news: heating oil prices have been declining steadily over the last five days, with the market price dropping 15 cents per gallon over that period. Unfortunately, the recent declines follow nearly three solid months of price increases. Since August, many different factors have contributed to higher heating oil prices: a weak US dollar tied related to shifts in monetary policy, upticks in economic activity in China, and ever-increasing numbers of speculative investors trading crude and heating oil products. In the background, extremely high inventories of heating oil and other petroleum products in the US are expected to keep long-term prices down and make for relatively steady prices this winter. But with prices increasing sharply for most of the last three weeks, heating oil dealers and consumers alike are starting to wonder when the benefit of ample domestic supplies will kick in.
On Sunday the News-Telegram of Worcester, Massachusetts reported on this concern in an article bearing the straightforward subtitle, “Ample oil supply no guarantee of low prices.” The report noted that high supplies of heating oil here in the US protect against sudden price spikes caused by external factors, but do little to stop the gradual upward creep of prices over the course of the season. The article also reminded heating oil users that conservation and efficiency measures taken at home are the only sure-fire way to reduce their bills by using less oil.
Central New York’s Ithaca Journal published a similar report on Sunday as well, noting that heating oil and propane prices during early October through early November were 13 percent higher than the same period last year. The article also included a call for energy efficiency in area homes as the most effective way to save money on heating, quoting Cornell professor Joe Laquatra:
“It’s a misconception that if you switch from oil to propane or gas you would save money,” Laquatra said. “Energy efficiency of the equipment they’re using and the level of energy efficiency in the house” are larger factors in heating cost savings. Fuel oil is the dominant fuel type used in the state, he said.
The Scranton Times-Tribune of Pennsylvania also reported on high heating oil prices of late on Sunday under the title “As fuel oil prices rise, people worry.” The report focused on the Federal Reserve’s actions and resulting weak dollar as the main cause of rising prices since late summer. But it also included an optimistic statement from Energy Security Analysis Inc. analyst Andrew Reed, “We predict by the time January rolls around, it will be 25 cents a gallon cheaper.”
Explanations aside, the reality is that heating oil prices are noticeably higher now than they were a year ago. As all three of the news reports confirm, heating oil users’ best defenses against high heating oil bills is, and always will be, efficiency and conservation. Sealing gaps and cracks in walls with caulk, insulating pipes, weatherizing doors and windows, and other simple do-it-yourself projects can reduce heating bills by hundreds of dollars a year.
Looking forward, an ample supply of heating oil in the Northeast is a comforting sign. Furthermore, the recent run-up in prices are not supported by fundamental factors, which leads many to believe that it may soon run out of steam. It could be that dropping oil prices seen in recent days is the beginning of an extended “correction” that will lead prices much lower. In any event, the sooner heating oil users undertake those energy-saving home improvements, the sooner they will see savings. As for the price of heating oil on the international market, we’ll all just have to keep our fingers crossed.