Factors That Have a Direct Effect on How Heating Oil is Priced

Heating oil in the U.S. is one of the most sought after commodities and there is good reason behind it. Regardless of the state, city, or locality, oil remains to be the dominant source of heating, both in residential and industrial settings. While natural gas has arguably the same claim, the fact that not every corner of the country has a gas pipeline means than the most remote places still rely heavily on heating oil.

(image credit: BelfastTelegraph.co.uk)

And while the demand for it is always high, the price of heating oil fluctuates in the most unpredictable manner and it has something to do with the price of crude oil, to which it is derived from. The thing with oil used for heating is that the demand for it is obviously seasonal – more particularly it is needed during the cold winter months. When crude oil prices are stable, it means that that the price for heating oil in the winter is expected to be high, the reason of which is because there is huge demand for it. For this reason, many homeowners who rely on it to heat their homes choose to buy the commodity at that time of the year when no else is buying it. By using this strategy, they ensure they’re getting it at a lower price compared to when they’re purchasing it during winter.

Because the cost of crude oil is the major determining factor in the determination of the price of heating oil, it means that the U.S. needs to have enough supply of it to meet the demand of its population. However, it is no secret that the supply and demand for it in the international scene is the major factor that determines its price. Yes, crude oil is a very lucrative business and countries go to war and conflict because of it.

Another factor that has a direct effect on how heating oil is priced is local competition. Simply put, local market competition is the main reason why there is a difference in the price of heating oil from one state to another. The number of heating oil delivery companies in an area will in fact become the barometer. For instance, if you live in a city where there are so many competing suppliers, what usually happens is that heating oil prices become so competitive since everyone wants to get the advantage of having more people buy their oil. If one company decides to price its commodity higher than others, it will obviously lose its clientele.

(image credit: Heating-Oils.com)

Next, the big players in heating oil production and distribution in this country also recognize the fact that regional operating costs also affect the price. In other words, there is a substantial cost involved in delivering heating oil to areas where access can be a bit challenging. This is merely a result of business since the more difficult it is to deliver oil the likely the price will be higher for it.

Ever since heating oil was conceived to be the most practical source of heating in American homes, the price of this precious resource has always been unsteady. The good thing though is that unlike before, the U.S. no longer bleeds for it since the government has found a way to get more supplies and eventually obtain reserves for the future generation.