Why are heating oil prices so high?

If you are a heating oil user in the UK, you’ll likely know that heating oil prices reached record levels in early 2022 and continue to remain high as we enter August. Oil prices have fluctuated massively over the past couple of years form record lows in 2020 to record highs in 2022. Read on to discover what has been driving these fluctuations and the current high prices.

Covid-19 Pandemic

In spring 2020, at the beginning of the Covid-19 pandemic, governments began to lock down populations and international travel was severely restricted.  Oil demand globally was estimated to have declined by 33% as three billion+ people were locked down in their homes due to the Covid-19 outbreak. This resulted in a large global surplus of oil supply which sent prices tumbling. In spring 2020 we saw heating oil prices of just over £110 inc VAT for 500 litres on the ValueOils website.

Opec Decrease Supply + Increased Global Demand

To combat low global oil prices, OPEC+ reached an agreement to cut supply by 9.7m barrels of oil per day (almost 10% of daily global oil consumption). This policy raised global oil prices initially and enabled them to stabilize for a period. Coupled with this decrease in supply, demand also began to increase as global lockdowns ended and international travel began again. This resulted in prices increasing again, albeit quite slowly. Our oil prices for 500 litres, typically averaged between £200-300 for around 14 months between December 2020 – February 2022.

Russia – Ukraine War

When Russia invaded Ukraine on 24 February 2022 this sent oil prices soaring to record levels. Price rises which would normally take 6-12 months, were happening in a matter of days. Russia is a top global oil producer and exporter and the invasion threatened global supplies. There were fuel shortages in many parts of the UK and in addition to this, sanctions placed by the EU and the US compounded supply issues which were already in place. At the beginning of March, oil prices peaked at almost £750 for 500 litres but have thankfully fallen since then, although they do remain much higher than the average of the past number of years. Our current average price is just over £440 for 500 litres ( price sample taken on 08/08/22)

Predictions for oil prices in Winter 2022

Unfortunately heating oil prices are extremely difficult to predict due to the number of factors that can affect them. Prices are likely to remain above the averages seen between December 2020 – February 2022. For further information on heating oil prices, please check out our heating oil prices page or for a live quote, please visit our homepage or give our team a call on 02890834055.