We at Johnston Oils are often asked about factors affecting the price of heating oil. While some are in our control and we do all we can to minimise them, some are out with our control. Heating oil prices can fluctuate due to a variety of factors. Here are the key influences that can drive up or lower the cost:
Global Market Influences
Crude Oil Prices
Heating oil is derived from crude oil, so its price is directly tied to the global cost of crude. When crude oil prices rise or fall, heating oil prices follow suit.
Organisation of the Petroleum Exporting Countries (OPEC)
This organisation of major oil-producing countries determines production levels, which can constrict or increase the global supply of crude oil and cause price fluctuations.
Geopolitical events
Political instability, sanctions, or conflicts in oil producing regions can disrupt the oil supply chain, causing market uncertainty and leading to price spikes.
Currency exchange rates
Crude oil is priced in U.S. dollars on the global market. A weak local currency (such as the British pound) against the U.S. dollar will make imported oil more expensive for suppliers, who often pass that cost on to consumers.
Economic conditions
A growing global economy typically increases demand for oil, pushing prices higher. Conversely, a recession or economic slowdown can cause demand and prices to fall
Seasonal and weather-related factors
Seasonal demand
Heating oil demand is significantly higher in colder winter months (typically October to March), which causes prices to rise. In the warmer summer months, demand falls, and prices are often lower. Many savvy buyers top up their tanks during the off-season.
Extreme weather
Severe weather events like blizzards or hurricanes can increase demand while simultaneously disrupting the transportation and delivery of heating oil, which can cause sharp price increases.
Local and national market factors
Competition
In regions with a large number of heating oil suppliers, competition helps to keep prices in check. In more rural or isolated areas with fewer suppliers, consumers may face higher prices.
Distribution and delivery costs
The cost to deliver heating oil from the refinery to your home is factored into the final price. Factors like delivery distance, local fuel costs for tankers, and logistical challenges can increase prices, especially for hard-to-reach rural properties.
Taxes and regulations
Government policies and taxes, such as VAT (Value Added Tax) and environmental regulations, can directly influence the overall cost of heating oil.
Bulk purchasing
The size of your order can affect the price per litre. Suppliers often offer a better rate for larger orders. Joining a local “oil club” allows a group of neighbours to combine their orders and secure a lower bulk price.
Refining costs
The costs associated with refining crude oil into heating oil and storing the finished product also affect pricing. Technological advances and government regulations can impact these expenses
If you’re tracking prices in your area, some of these factors may be more relevant at certain times of year or depending on where you live. You can track prices in your area using Johnston Oils depot pricing trends: https://johnston-oils.co.uk/heating-oil/heating-oil-prices/
