This week we will try and answer another frequently asked question by many of our customers: What affects the price of heating oil?
There are a number of factors on a global scale which have an impact on the price that you will pay to heat your home. Oil is traded on the world market and below are just some of the reasons why the price of heating oil fluctuates greatly throughout the year.
• Growth in large global economies, particularly China and the USA – the two largest oil users in the world. (Japan is the third largest oil user in the world, while the UK sits in 14th and Ireland is 66th) These large economies play a crucial role in the price you pay for your heating oil. Positive statistics in job markets or employment levels, house prices rising or export levels will often translate into a rise in heating oil as forecasts indicate demand for oil will be likely to increase. Equally if demand for oil is falling, i.e. poor economic growth figures the price may fall.
• Exchange rate – the exchange rate of the Pound vs. the Dollar will play a role as oil is traded in Dollars. A weak pound means you will generally pay more for your home heating.
• Wars / Political instability in the Middle East – worries around access to oil due to wars / political unrest in this region can often see consumers stock up or ‘panic buy’ increasing demand for oil and therefore raising the price.
• Natural Disasters – In 2005 Hurricane Katrina halted oil production along the Southern Gulf Coast of the USA. As supply was suddenly cut, and demand remained the same, oil prices rapidly increased to over $70 a barrel in a short period of time.
• Recession – this causes a number of factors which can alter the price of oil. As consumers cut back on their spending they often cut back on driving and become more frugal when heating their home. This lowers demand for oil and therefore lowers the price. In addition consumers cut back on their spending, reducing shipping of goods and in turn lowering the price demand for oil.
Factors within the UK rarely have a large impact on the price of heating oil; though local factors can of course have an impact on the price you pay; such as severe weather, shortage of product at the terminal (sometimes caused if a ship is late) will have an effect on local prices. To get an indication of prices in your area, please see our locations pages
It is almost impossible to predict what the price of oil will do, tomorrow, next week or next year, though you can have a look at our heating oil prices page to get an indication of the UK trends throughout the past 12 months.