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Why Are Heating Oil Prices So Hard To Predict?
One question customers ask us every year is “why do heating oil prices change so much every year?” Good question!
The reality is that heating oil pricing is the result of the constantly-changing factors
Some factors included in heating oil price changes
The price of crude oil – This factor has the greatest impact on heating oil prices, accounting for as much as two-thirds of the cost of the fuel. The problem is that crude oil is traded in global markets, which means it is subject to many market forces that make its price so volatile.
Weather – About 90 percent of the heating oil used in U.S. homes is consumed in the Northeast, where winter weather can vary drastically from season to season. In an especially cold winter, heating prices will go up due to increased demand (and, often, to constrained supply); in a relatively mild winter, heating oil prices may stay level and could even go down.
Competition – If you live in an area where there are many heating oil suppliers competing for your business (like the Hudson Valley, for example), heating oil prices will tend to be lower.
Policies – Political agendas can influence the use of home heating oil by making it more or less favorable to buy or sell crude or heating oil or its alternatives.
The price of fuel alternatives – When the cost to use alternative fuels rises, many homes switch to heating oil, raising demand for the latter; this increase in demand typically drives up oil prices in the short- or medium-term.
As you can imagine, each of these factors is constantly changing, making the price of heating oil impossible to predict; anyone who tells you otherwise is not being truthful.
Managing heating oil prices with a pricing plan
Knowing that it’s impossible to predict oil prices in a given year, it can be quite challenging to know the best way to pay for your fuel. To cover your bases, it’s best to understand all the buying options are available to you, and how to choose the plan that’s best for you and your family.
Here are the three payment options available from Bottini Fuel for your heating oil:
Market Price – In a market price program, heating oil prices change from day to day with no price ceiling or floor. That means you can take advantage of falling prices without paying a fee – a great choice if prices never go up. But sometimes they do go up – in which case you’ll have to pay the higher rate.
Fixed Price – A fixed rate (pre-buy) rate locks in a heating oil price for the year, no matter what happens in the market. A fixed price protects you from rising prices, but also prevents you from benefiting if the market price drops.
Price Cap – A price cap program limits how much your heating oil price can rise – but not how far it can drop. Like all heating oil suppliers, we charge a fee for this service: the fee covers our costs to purchase insurance from our suppliers in case the market price drops (the fee only covers the cost of the insurance; we don’t profit from collecting it). While no one can predict where oil prices will go, one thing is certain: if you enroll in our price cap program, they can only go down from your agreed upon rate.
As you can see, each pricing option has pros and cons. Which pricing program is right for you? Contact us today to discuss – and don’t forget to ask us about enrolling in EZ Pay, which splits your annual heating oil bill into 12 manageable monthly payments.
Please note: At Bottini Fuel, your safety and comfort are always our priority. Please see our COVID-19 Service Update Page to learn more about how we are working to keep your family and our crews safe, your home heating systems working, and your propane and heating oil deliveries coming throughout this challenging time.