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What Will Affect Propane and Heating Oil Prices in 2012?

On average, propane and heating oil prices have fallen in New England and Atlantic Canada by about 10% since January 1st, 2012. The primary driver of heating oil and propane prices is the price of crude oil, which has been falling since January 1st, 2012. Extreme weather, seasonal demand, supply disruptions and speculation can also affect short-term propane and heating oil prices. Therefore, to get an idea of where heating fuel prices could go, you have to understand where crude oil prices could go.

What drives the price of crude oil?

Crude oil prices are driven by real and anticipated supply and demand. An increase in supply or a decrease in demand leads to lower prices. A decrease in supply or an increase in demand leads to higher prices.

Why have crude oil prices dropped and where are they headed?

Crude prices have primarily dropped because of concerns over the economic growth rates of the United States, China and Europe. Slower economic growth leads to lower demand for oil, and therefore lower crude oil prices.

Global markets are impossible to predict since there are too many variables. Therefore, no one can accurately predict the price of crude oil – beware of people or companies that try to convince you they can predict crude oil prices.

What we can do is look at the events that could likely affect future crude oil prices:

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 the global economic growth and recovery, and therefore lower oil demand;
• No resolution to the European debt crisis, and therefore a belief that Europe’s economies will continue to suffer;
• Conflicts in Africa and the Middle East get resolved in 2012 and oil supply increases (e.g. Yemen, Syria, Sudan and Iran).
• Decrease in oil supply from African and Middle Eastern countries due to conflict or economic sanctions (e.g. Yemen, Syria, Sudan and Iran);
• Forecasts for global economic growth improve, particularly in the United States, China, or Europe;
• The European debt crisis is resolved in 2012 and Europe’s economies improve.

If it’s really important for your peace of mind to predict your budget for winter fuel bills, then you should consider one of our Price Protection Plans for our New England customers (currently open) or our Cap Pricing Program for our Atlantic Canada customers (open in the Fall). With these options, you’ll be able to budget for the upcoming heating season. If you would prefer to pay a market price or are absolutely convinced that heating oil or propane prices will fall from here, then you can choose our variable pricing option.

One response to “What Will Affect Propane and Heating Oil Prices in 2012?”

  1. Roberta Daw says:

    What would it cost for a pre-buy versus a lock-in rate?

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