What Influences the Cost of Heating Oil?
Written on: October 23, 2023
Are you the one managing your family’s finances? If you are then you keep an eye on the price of things and it’s hard not to notice when things get more expensive. And that’s been the case for a lot of the things you need for your New England home lately. Supply and demand along with some other factors affect how much everything costs. That includes the cost of heating oil. It helps to understand the factors affecting the price you pay for heating oil. Keep reading to find out what they are.
The Heating Oil Market
The heating oil you use in your Massachusetts or New Hampshire home is like any other commodity. There are a number of variables that influence how much it costs from day to day, week to week, or month to month. Let’s take a look at some of those factors so that you’ll have a better understanding of why you sometimes notice price fluctuations on your monthly bills.
Here are some of the factors that determine the cost of heating oil:
- The cost for crude oil: The price of crude oil has the largest and most direct effect on the price of heating oil. In fact, the price of crude oil is responsible for up to 75% of the price of heating oil. Additionally, because crude oil is an internationally traded commodity, it’s at the mercy of a number of variables and global market forces that are constantly changing.
- Supply & demand: This basic principle of economics affects the cost of just about everything, and that includes the cost of heating oil. In the case of heating oil, demand is usually determined by the weather. As a New England resident, you know firsthand how variable the weather can be. During a long and harsh winter, you’ll see higher heating oil prices because demand is higher, and the supply of heating oil isn’t limitless. Conversely, the demand for heating oil decreases during the summer months and so do the prices. For this reason, it’s a good idea to fill your tank in the off season.
- Location: Where you live affects how much things costs. That’s true of housing, groceries, gasoline, and the heating oil you use in your home as well. Folks who live near a shipping port tend to see lower heating oil costs because their fuel provider doesn’t have additional transportation costs to pass along to the consumer. And if you’re fortunate enough to live in an area with several competing heating oil companies, you’ll pay less for heating oil because you can shop around for the best price. When suppliers have to compete for your business, you benefit. They will keep prices as low as they can to attract and keep customers.
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