Once again, we’re seeing heating oil and other energy prices surge across the board. This is not uncommon in the sometimes volatile energy markets, but it hurts just the same—especially on top of a still-lingering pandemic. Your local heating company knows how painful that can be for their customers. But it’s painful for your local New Jersey supplier as well. We’ll explain that later.
Considering the long-range forecast for winter, it seems like we’re in for a bumpy ride over the next few months. Demand for heating fuel is expected to be higher this winter, based on forecasts from the National Oceanic and Atmospheric Administration (NOAA). Because of a colder-than-normal winter, the agency predicts that the average amount of heating degree days will be 3% higher than the winter of 2020-21.
To get a better handle on what’s driving higher energy prices, we have to look at what’s happening with crude oil to make a connection. Gasoline and heating oil, both of which are refined from crude oil, have both risen more than a dollar more per gallon vs. a year ago. As the price of crude oil goes, so goes gasoline, heating oil and many other products derived from it.
In October, the price of crude oil climbed above $80 per barrel, a benchmark that hadn’t been reached in seven years.
It’s worth noting, however, that crude oil prices have been much higher in the past. The price of a barrel of crude actually topped $100 a few times during 2011-2013. By the Fall of 2014, though, prices began falling fast and eventually reached the $40-$50 per barrel range. Prices hit a rock bottom of $15 per barrel during the early stages of the pandemic in April 2020. Since then, however, prices have been steadily rising.
In its Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) expects crude oil prices to remain in the $80 range until the end of the year. In 2022, the EIA believes lagging supply will finally overtake demand.
COVID-19 has played a large role in the current state of the market. Demand for oil sunk to deep depths as more countries went into lockdown. Global supply became diminished as producers responded by scaling back oil input. Now, with the wide availability of vaccines in most countries, people are traveling again and businesses have opened up. But global supply hasn’t caught up with all of this increased demand. When you match low supply with high demand, prices go up. Of course, this is true for many other commodities, not just for heating fuel.
People sometimes misunderstand how negatively higher prices impact local fuel dealers. Heating oil companies don’t make more money when prices rise like this—they actually make less.
Think of it this way: it’s like when the cost of coffee, milk or orange juice rises. It’s not the local grocery store that is profiting. (That’s left to the Wall Street investors). Heating oil customers have a harder time paying their bills. They reduce expenditures. Heating oil companies may need to tap into their lines of credit more. Phones light up with questions from customers. So the sooner energy prices drop, the happier your heating oil company will be.
In the meantime, please reach out your heating oil supplier to find out ways they may be able to help you reduce your energy costs, or handle payments more easily. And if you are worried about keeping up with your heating oil costs, please pick up the phone and call them. They can generally work with you if you reach out before you fall behind.
Rest assured, your heating oil supplier will do everything possible to ensure they can make deliveries—no matter the cost or difficulty they face.
Your New Jersey heating oil company appreciates your understanding during this difficult time. Let’s all get through this winter warm and safe and hope for better days—and lower prices—next spring.