Oil is a high-performance fuel that costs up to 5.5 times less than electricity to heat your home. But there can be fluctuations in the price you pay to fill your tank. If you’ve ever wondered why the cost of heating oil is constantly changing, here’s a rundown of some of the factors that can affect the price you pay.
Why do oil prices rise and fall?
If you use heating oil to stay warm in winter, you’ll know the cost changes constantly. The price you pay to heat your home can vary, and you don’t always know what to expect when you fill your tank each year. Understanding the factors that affect the price could help you get a better deal.
What factors affect heating oil prices?
Oil is a commodity we all need, and the price of oil affects all our lives. Just imagine running your business, getting to work or heating your home without it. These are the most common factors that can cause prices to change, so you know what to expect next time you’re on the lookout for affordable heating oil.
Price of crude oil
If you want to know what price you’ll pay to keep warm this winter, you need to keep an eye on the cost of crude oil. According to the Energy Information Administration, the price of crude oil is the most significant component in the price of fuel and heating oil.
Factors that affect the pricing of crude include:
- Current supply and output are controlled by the Organization of the Petroleum Exporting Countries (OPEC) PLUS Russia and other non OPEC countries.
- Future supply and stockpiled reserves are high or low.
- Changes in demand from weather, pandemics and alternative energy
- War, political upheaval and natural disasters can affect supply
Production and operating costs
It’s worth remembering that crude oil is just part of the overall equation when pricing heating oil. Each distributor also has additional production and operating costs that affect the overall price. These include:
- Employee wages and benefits
- Importation costs
- Insurance, fees and business taxes
- Truck maintenance
The good news is that homeowners have a choice of suppliers. Locking into a supplier with a contract restricts you to buy at a contract price. Requiring you to buy under contract has a supplier in control of the price you pay.
Non-contract homeowners can choose who they buy from and can consider pricing and burner service and reliability. Ariba competes with other companies for your business and strives to be competitive on all levels. Competition between companies makes Ariba work hard for your business. Ariba has budgets and automatic delivery at no extra charge at the COD price.
It probably won’t surprise you that weather could influence the price you pay for heating oil. A hard winter could have natural gas companies shut off multi-fuel users and have the price oil refineries like Sunoco raise the price to Ariba. Or a soft winter could cause prices to drop. At the end of the day, Ariba changes the price up to and down with what our suppliers charge always working to save you money.
Severe weather events can affect the price of oil in other ways:
- Transporting oil becomes more difficult because of dangerous road conditions
- Increased demand drives prices higher
- In the Northeast, buying additional oil supplies from Europe or the Gulf Coast presents logistical challenges affecting heating oil prices in NJ. This works to drive prices up or down.
Changes in the energy industry
Instability and uncertainty in the oil industry can also lead to fluctuating prices. Temporary changes in refining capacity can temporarily cause oil spot shortages that could lead to price rises.
But it not only changes in the oil industry that can affect heating oil prices. For example, by 2022, renewable energy is estimated to make up 40% of our energy needs. So, as alternative heating sources become more popular, the price of oil could fall.
Supply and demand
The basic economic law of supply and demand affects the price of all commodities, including oil. Here’s how it works:
- High supply and low demand keeps the price low
- Low supply and high demand sends prices skyrocketing
- When supply and demand equalise, customers can expect stable prices
Sometimes the price of oil can surge when several factors converge. An intense cold of fewer than 10 degrees puts increased pressure on the supply of natural gas and PSE&G can shut off the supply to large uninterruptible users like apartment buildings and factories. Just as demand is up the lack of natural gas can make a heating oil demand surge. In turn, that causes prices to temporarily increase and suppliers could start to run low. When shortfalls are projected the spot price will rise and the cost to Ariba and all other companies could increase. As soon as the weather abates prices will ease downward.
Oil prices generally show small fluctuations, but supply shortages and severe weather can cause a larger fluctuation. The pandemic caused a lack of gasoline use and aviation fuel usage to drop. This caused record drops in pricing where Ariba was delivering at around one dollar per gallon. So keep an eye on the news and watch diesel prices as heating oil and diesel is the same fuel. Watch the weather for extreme cold and snow and stay prepared.
Neighborhood pricing factors
The majority of homes relying on heating oil are located in the Northeast. That ensures that prices remain relatively stable. However, some additional factors could see you benefit from inexpensive prices from Ariba Oil.
If you don’t want to pay over the odds this winter, Ariba Oil is your affordable heating company for a stable and high-quality supply with the best heating oil prices in NJ. Contact us to order your discount oil today. Order online at Aribaoil.com or call 973 375 0770