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Heating oil is a widely used petroleum product for warming homes with 8.1 million households in the United States alone, consuming it as major heating fuel. According to history, heating oil prices fluctuate every year but the demands get high during the winter months. The major consumers are mostly residential customers and the demand is highly seasonal, mostly peaking during the months of October until March. Also, it is notable that Northeast countries are most reliant on such heating oil.
Heating oil prices are determined from the cost of crude oil, the cost of production, the cost of marketing, the cost of manufacturing and even the cost of profits of refiners, dealers and wholesales. The biggest portion is given to marketing and distribution, and the second biggest part lies in the cost of crude oil.
There are many reasons why the prices of heating oil fluctuate. Here are a few of them:
• Seasonality of the demand – Since the demand for heating oil varies on the season, the prices of heating oil gradually rise during peak seasons which as of to date, winter. Thus, about 650 to 1000 gallons of this heating oil are expected to be consumed only during winter.
• Crude oil price change – A big portion of the price of heating oil depends on the cost of crude oil. With this fact, it is expected that the price of the crude oil varies directly on such factor.
• Competition in the local markets – Due to the small number of competitors in the local markets, consumers in the rural or remote areas are likely to face higher prices. Meanwhile, consumers in local areas where a large number of competitors are present will likely face smaller prices.
• Regional costs – Regional costs are operating costs covering the transportation of products from one location to another. It also covers the costs in doing business dealings while largely depending on the location or area. These costs include salaries and wages, equipments, employee benefits, leases or rents, overhead costs, insurance policies and even government fees like taxes and several other local fees.
