Why Do Home Heating Oil Prices Rise & Fall So Often?

Home heating oil prices never stay in one place long and it can be quite frustrating. It seems that just when we need it most, the cost of home heating goes up. Is that a coincidence or some evil plot? Actually, it is neither, and while the reality may not be any more comforting, knowledge is power, and knowing the facts may help in planning purchases.

What Affects the Price?

There are many factors impacting heating oil prices and these factors are constantly in flux. Among the most noticeable are: seasonality, competition, underlying cost of crude oil, exchange rates and cost.

Seasonality

If there were as many people in the southern hemisphere in comparable latitudes, the pricing would probably not be affected by seasonality. It is this population imbalance that creates so much need for heating oil in most of the civilized world as demand is growing in the UK.

Competition

The more competition, the merrier, from the customer’s point of view. Competition or the lack thereof, will affect pricing and it is a good idea to encourage a competitive spirit in suppliers when shopping for the next delivery. The larger the population base in a particular area, the more likely there will be aggressive price competition from the heating oil suppliers.

Underlying Cost of Crude Oil

The end user price is affected by the spot price of crude oil, which in turn, is impacted by numerous global factors. Growing demand in newly industrialized countries such as China and India are creating more demand. Additionally, concerns with safe access to supply in the Middle East or actions by the political body, Organization of Petroleum Exporting Countries (OPEC) both play a role in pricing. Finally, speculators in crude oil make buy/sell decisions affecting price based on the uncertainties they foresee in the world situation, whether these uncertainties are realized or not.

Exchange Rates

The crude oil market operates in dollars as opposed to pounds. As a result, it is necessary for heating oil suppliers to consider the fluctuations in exchange rates.

Cost

Similar to other businesses, the basis for determining the pricing must include covering all associated costs plus a profit margin. The two most significant costs affecting heating oil are the refining and delivery costs to get the end product to the customer. Finally, the level of service a customer demands will be a consideration in the delivered price.

Heating Oil Suppliers

Another reason why heating oil prices fluctuate so much is a lot heating oil suppliers tend to buy only small amounts that are required as and when by a consumer. This way they avoid buying large quantities of stock and run the risk of losing out if the heating oil prices drop. On the other hand finding a heating oil supplier that buys a lot of bulk stock and then signing up to a fuel management plan with them is the way to avoid the fluctuation in heating oil prices. They typically set a heating oil price and this will remain constant as long as you buy heating oil from them. The added benefit to this type of purchase is the heating oil supplier makes sure you never run out of heating oil.

Find a Fuel Supplier has been set up to serve the UK market with the best prices of heating oil, kerosene prices and other types of  fuel. We are a price comparison website listing real-time fuel prices for consumers and are 100% independent of fuel retailers and oil companies taking no commission on any sale made.

Author: David Khan

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