Oil prices change regularly. To us, the consumer, they seem to climb upwards, but this is not always the case. Oil prices, and home heating oil prices fluctuate considerably and in the last few years have seen reductions and price hikes. These changing prices can be confusing and unpredictable and when we would like to buy our heating oil at the cheapest price possible it would be good to know what are the circumstances that influence the price of kerosene. There is a complex set of factors which effect the price of heating oil but simply put, it is linked to the price of crude oil. The cost of crude oil globally is linked to three determining factors. Supply, Demand and Geopolitical factors.
Supply
OPEC (The Organisation of the petroleum exporting countries) is made up of 14 countries who are the major player in oil exports and OPEC members currently supply over 40 percent of the worlds. They have the power, both in terms of fuel and its cost. OPEC members decide collectively when to increase or increase oil production to secure an efficient, economic and regular supply of petroleum to consumers, maintain a steady income to the producer and a fair return on capital for the investor. Therefore, the decisions that OPEC Make directly affect the price of your home heating oil and while their grip on the market may have eased a little in the last few years, OPEC’s every move is watched closely by governments, hedgers investors, policymakers and us, the consumer.
Read more here.
Demand
If we ever needed confirmation that the demand for oil had a direct impact on the price of the oil tank fill, it was during the pandemic. Home heating oil plummeted to its lowest price in at least ten years because of the coronavirus pandemic. Prices went down by an incredible 30%. Yes, we were still using heating oil and many people were heating home offices all day. Again, the link was to the price of crude oil which dropped by 321%, a 21-year low from which it has not recovered. This was due to the decrease in demand for oil in cars, the aviation industry as the world ground to a halt. So, while the kerosene demand was still high in an Irish spring, the demand for crude oil was on the floor. Prices favoured the buyer. A surplus of crude oil has also influenced the cost of crude oil in the American market. Strong economies need more oil so a post Covid slump could see the low prices continuing. Demand is also seasonal, and this is why we should stock up during the summer months.
The glut of oil on world markets, due to the boom in fracking in the US, has also helped suppress prices in recent years. This means that those filling up on home heating oil in advance of the winter months have probably never had better value.’ Daragh Cassidy, of price comparison website Bonkers.ie May 2020,
Geopolitical factors
Crude oil, or black gold as it is known, is often produced in some of the worlds most politically unstable places. This is probably not a coincidence, but it has a major influence on prices. In the past, the Iran revolution, Iran - Iraq war, Arab oil embargoes and the Persian Gulf war have all caused disruptions to supply, triggering an increase in price. There can also be adverse weather in an oil producing region and a move towards greener fuel consumption will also decrease demand and influence the cost of crude oil.
Threats on oil production can mean that production may be compromised, this in turn increases the price of the oil as the supply is at risk. Energy policies being changed also affects price, for example the government might ban certain activities that affects the production lowering the price or the government may approve of an area for oil exploration which will increase supply and lower the price. - rix.co.uk
Local Factors
The 2021 Budget carbon tax increases saw the price of home heating oil rise from €26 per tonne to €33.50. This means that €84 of every 900 litre fill is now going directly to Carbon tax. So while there is much affecting the price before crude oil gets to the Irish Port, there are local factors which affect price too. There is also a huge difference in the profit margin which each company puts on their kerosene. It is always wise to check a comparison website to see who is giving the best deal.
When is the best time to buy heating oil?
The obvious answer to when it is best to buy is when the price is at its lowest! That may very well mean filling the tank during the summer months. If you are going to stock up for the winter, it is advisable to have the tank well kitted out against theft. See our blog on oil tank theft and how to avoid it. You could study the global market, but even then, it is a volatile and unpredictable commodity. Sometimes a decrease is forecast and then OPEC will swing into action and decrease supply to control the market, or weather affects supply or political unrest causes disruption. Crude oil, home heating oil are precious commodities indeed, make sure your tank is secure, your boiler works properly and keep an eye on the fluctuating prices to get the best deal for you and your family.
