What Determines The Price That You Pay For Your Fuel?
When you heat your home with fuel oil, it is important to understand why you pay the price that you do. It should be noted that you should never buy cheap oil that contains a high amount of impurities in it. Doing so leads to issues with your heating oil tank and your heating system. It is worth paying more for high quality oil because you won't have to deal with high repair costs and even, premature replacement of your tank and heating system. Below you will find the determinants of what influences oil prices.
There are many factors that influence the price of heating oil. What you pay for heating oil one day may be different than what it is on another day. Homeowners often are confused about why the price of heating oil changes.
Crude Oil: The price of fuel oil depends on the price of crude oil. Heating oil is a product of crude oil and, therefore, its price is dependent on the price that is set for crude oil. Since the price of crude oil is influenced by a number of factors, it's price goes up and down. A few factors that change the cost of crude oil include:
Seasonal Demand: As with anything that is involved in the economy, supply and demand plays a major role when it comes to heating oil prices. Heating oil is primarily used to heat homes during the cold season. Therefore, its demand it highest when the cold weather arrives. This is why it is more expensive during the winter as opposed to the summer. Homeowners use the most oil during the three coldest months of the year which are usually December, January, and February. This is the peak of the heating oil season. The amount of oil that is used during this time of year, generally matches how much oil is used during the rest of the year, or the remaining nine months. Summer, when the demand for fuel oil is not as high, is when fuel oil is priced at its lowest.
Crude Oil: The price of fuel oil depends on the price of crude oil. Heating oil is a product of crude oil and, therefore, its price is dependent on the price that is set for crude oil. Since the price of crude oil is influenced by a number of factors, it's price goes up and down. A few factors that change the cost of crude oil include:
- supply and demand
- worldwide supplies
- weather
- political events
- economy
- OPEC regulations
Seasonal Demand: As with anything that is involved in the economy, supply and demand plays a major role when it comes to heating oil prices. Heating oil is primarily used to heat homes during the cold season. Therefore, its demand it highest when the cold weather arrives. This is why it is more expensive during the winter as opposed to the summer. Homeowners use the most oil during the three coldest months of the year which are usually December, January, and February. This is the peak of the heating oil season. The amount of oil that is used during this time of year, generally matches how much oil is used during the rest of the year, or the remaining nine months. Summer, when the demand for fuel oil is not as high, is when fuel oil is priced at its lowest.
Competing Heating Oil Companies: The price that is set for heating oil is also dependent on how many fuel oil delivery companies you have in your area. Naturally, the more companies in one area, the lower the price. This is because these companies have to complete with another to earn the business of the consumer. Rural areas, where there are fewer delivery companies, usually have higher prices.
Local Economies: Homeowners will often observe that one heating oil company will charge a different price than another heating oil company in their area. These slight differences in price are usually attributed to:
These are the four major factors that contribute to the price that you pay for your heating oil. Some homeowners try to cut corners by buying discount oil from disreputable dealers. However, this is a bad idea. You may pay less for your oil initially but, in the end, you actually pay more. This is because low quality oil will clog your fuel lines, create soot at the bottom of your tank, and much more. This can lead to premature replacement which costs more than paying for high quality oil in the first place.
Local Economies: Homeowners will often observe that one heating oil company will charge a different price than another heating oil company in their area. These slight differences in price are usually attributed to:
- gas prices
- training
- employee wages
- insurance
- other overhead charges
These are the four major factors that contribute to the price that you pay for your heating oil. Some homeowners try to cut corners by buying discount oil from disreputable dealers. However, this is a bad idea. You may pay less for your oil initially but, in the end, you actually pay more. This is because low quality oil will clog your fuel lines, create soot at the bottom of your tank, and much more. This can lead to premature replacement which costs more than paying for high quality oil in the first place.