As we’ve experienced sometimes in past years, we’re now seeing heating oil and all other energy prices surge across the board. This is not uncommon in the energy markets, which are prone to volatility at times, but higher prices hurt just the same—especially when they arrive on top of a still-lingering pandemic.
To get a better handle on what’s driving higher heating oil prices in particular, we have to look at what’s happening with crude oil to make a connection. Gasoline and heating oil, both of which are refined from crude oil, have both risen more than a dollar more per gallon vs. a year ago. As the price of crude oil goes, in most cases so goes gasoline, heating oil and many other products derived from it.
In October, the price of crude oil climbed above $80 per barrel, a benchmark that hadn’t been reached in seven years.
In its Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) expects crude oil prices to remain in the $80 range until the end of the year. The good news is that in 2022, the EIA believes lagging supply will finally overtake demand. This should lead to a drop in global crude oil prices.
To see a history of heating oil prices in Massachusetts, please go here.
Last year, demand for oil sunk to deep depths as more countries went into lockdown after COVID-19 was declared a pandemic. Global supply became diminished as producers responded by scaling back oil input. Now, with the wide availability of vaccines in most countries, people are traveling again and businesses have opened up. But global supply hasn’t caught up with all of this increased demand. When you match low supply with high demand, prices go up. Of course, this is true for many other commodities, not just for heating fuel.
We’re seeing this right now across the board with increased costs for consumer goods because of many tangles in the global supply chain.
Right now, Wall Street speculators are not “bullish” on investing in the fossil fuel industry. They’re still skittish about how the crude oil market crashed and burned last year at the beginning of the pandemic.
Do you remember the Spring of 2020, when crude oil prices fell all the way to negative $30 per barrel? Traders had to pay buyers to take oil! Since then, prices have been steadily rising.
Investors are also holding back as they watch legislators try to move toward more renewable energy. The irony is, the heating oil industry is making excellent progress with making their fuel more dependent on renewable energy too.
The heating oil industry in Massachusetts is committed to helping to ease the impact of climate change with Bioheat® fuel — a blend of ultra-low sulfur heating oil and biofuels made from renewable sources.
Bioheat fuel is a pathway to reducing carbon dioxide emissions (CO2) related to greenhouse gases. The goal is to transition by 2030 to a B50 blend –50% biofuel and 50% heating oil– that’s called B50 Bioheat SuperPlus™. This blend will reduce greenhouse gas emissions in your home by 40%.
The B50 blend of Bioheat fuel will also continue to improve system efficiency and will push us closer to realizing a carbon-neutral future by 2050. The B50 blend is not an end goal, but rather a step on the journey to a completely renewable liquid heating fuel. In the coming years, we will be within reach of a fully renewable product–B100 Bioheat fuel.
Knowing what drives the price of heating oil, and understanding that it’s more complicated than just competition between local heating fuel dealers, will help you make smart choices. There’s no way to control oil prices affected by the global market, but your heating oil company does offer ways to help give you a bit more certainty.
But in times like this, people sometimes misunderstand how negatively higher prices impact local fuel dealers. Heating oil companies don’t make more money when prices rise–—they actually make less.
Think of it this way: it’s like when the cost of coffee, milk or orange juice rises. It’s not the local grocery store that is profiting. (That’s left to the Wall Street investors). Heating oil customers have a harder time paying their bills. They reduce expenditures. Heating oil companies may need to tap into their lines of credit more. Phones light up with questions from customers. So the sooner energy prices drop, the happier your heating oil company will be.
In the meantime, please reach out your heating oil supplier to find out ways they may be able to help you reduce your energy costs, or handle payments more easily.
Rest assured, your Massachusetts heating oil supplier will do everything possible to ensure they can make deliveries—no matter the cost or difficulty they face.
Let’s all get through this winter warm and safe and hope for better days—and lower prices—next spring.