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Where Are Heating Oil and Propane Prices Headed Spring and Summer 2012?

Heating oil and propane prices are expected to remain at current levels for the foreseeable future, according to a recent EIA report (US Energy Information Administration, Mar 6, 2012). Heating fuel prices are primarily driven by crude oil prices, and the EIA expects crude oil prices to remain above $100 a barrel in 2012-2013.

What Affects Heating Oil and Propane Prices?

The prices of heating oil and propane are primarily driven by crude oil. Extreme weather, seasonal demand, and supply disruptions can also affect short-term heating oil and propane prices.

What Will Affect 2012 Crude Oil Prices?

There is a tremendous amount of uncertainty about the future of oil prices, because there are so many factors that can affect supply and demand.

These events will likely lead to lower 2012 crude oil prices:These events will likely lead to higher 2012 crude oil prices:
• Lower predictions for global economic growth and therefore lower oil demand
• China’s economic growth rates decrease
• The European debt crisis does not get resolved or gets worse
• Conflicts in Africa and the Middle East get resolved in 2012 and oil supply increases (e.g. Yemen, Syria, Sudan and Iran)

• Higher than expected world economic growth
• Decrease in oil supply from African and Middle Eastern countries due to conflict or economic sanctions (e.g. Yemen, Syria, Sudan and Iran)
• Global economies improve more quickly than expected and oil demand increases
• The European debt crisis is resolved in 2012 and European countries increase their demand for oil

3 responses to “Where Are Heating Oil and Propane Prices Headed Spring and Summer 2012?”

  1. richard says:

    James, you are right on with your post….. propane should go down – we had a very mild winter, and the price of oil is even going down. this will be the year for me to decide – do i go to solar this fall

  2. James Low says:

    Propane, or liquefied petroleum gas, as it’s sometimes know, is a byproduct of oil and gas production. Propane prices typically follow crude oil, but today, they’re tracking natural gas. That’s because drilling in shale rock deposits is yielding a “wet” natural gas containing liquids that are refined into propane, butane and other components. By some estimates, more than 60 percent of domestic propane is cominmg from gas deposits. Natural gas wholesale prices have dropped around 75 percent in the last two years. Therefore, I expect propane costs also to drop.

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