Heating Oil

Heating Oil Pricing

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How heating oil is priced — Heating oil prices paid by the customer are determined by several factors. The cost of crude oil, the cost to produce and refine the product, the cost to market and distribute the product, various state and federal taxes, terminal surcharges, as well as the profits (and sometimes losses) of refiners, wholesalers and dealers.

Why heating oil prices fluctuate

Heating oil prices paid by consumers can vary over time and by where a consumer lives. Prices can change for a variety of reasons. These include:

• Seasonality in the demand for heating oil — When crude oil prices are stable (refineries are operating at normal levels and severe weather such as hurricanes have not disrupted refinery capacity or transportation pipelines) home heating oil prices tend to gradually rise in the winter months when demand is highest and decline in off peak months.
• Changes in the cost of crude oil — Since crude oil is a major price component of heating oil, changes in the price of crude oil will generally affect the price of heating oil. Crude oil prices are determined by worldwide supply and demand. Demand can vary worldwide with the economy and with weather. Supply can be influenced by the Organization of Petroleum Exporting Countries (OPEC) and other factors.
• Supply and demand factors — Currently, with the strong world economy, especially from the developing economies of China and India, the small daily difference between worldwide crude oil production (supply) and worldwide consumption (demand) is what is driving the price of crude oil prices to record high prices.
• Natural gas demand — During severely cold weather, high consumers of natural gas, such as manufacturing plants and other businesses, are forced to switch over to heating oil creating a temporary strain on the demand for heating oil. This temporary demand may cause supply disruptions which typically drive up the price of heating oil during peak periods of cold weather.
• Regional operating costs — Prices also are impacted by higher costs of transporting product by barge, pipeline and truck. In addition, in the New York City marketplace, the reduced number of available oil terminals, because of environmental and other reasons, is increasing the cost of doing business to local gasoline and heating oil dealers. Costs of doing business include wages and salaries, benefits, equipment, lease/rent, insurance, overhead, and state and local fees.