<

Fuel for Thought

Is there something you'd like to read about? Suggest a Blog

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.

1 Comment

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 Comments

Where Are Heating Oil and Propane Prices Headed This Heating Season?

Heating fuel bills will likely be higher than last year, according to a recent EIA report (US Energy Information Administration, October 12).  Compared to last winter, the EIA is forecasting 10% higher heating oil prices and 9% higher propane prices for the Northeast.  They are also forecasting a slightly warmer than average winter, which would help lower heating bills.

The EIA is a reputable agency and provides valuable forecasts.   However consumers should note that no expert or agency can predict heating oil and propane prices with 100% accuracy, there are simply too many factors that affect prices.  Some of these factors include: crude oil prices, regional weather, regional supply, and speculation.

Because crude oil is the primary element in heating oil, the price of crude oil will ultimately drive heating oil prices. Over the long term, propane prices also tend to follow crude oil prices.

 

Factors That Could Affect Short Term Crude Oil Prices

These events will likely lead to lower crude oil prices:

  • Lower predictions for the global economic growth and recovery
  • European debt crisis gets worse
  • Libyan oil supply comes back online more quickly than expected

The events will likely lead to higher crude oil prices:

  • Global economies improve more quickly than expected
  • Syrian oil supply is disrupted due to current turmoil or economic sanctions

 

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 or our Cap Pricing Program for our Atlantic Canada customers. 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.

 

Leave a comment

Where are Heating Oil and Propane Prices Headed This Winter?

Many customers have locked in their heating oil or propane price for this winter.  Others are still waiting to see where prices are headed and hope that prices will fall in the next month or so.  What are the factors causing prices to move and where are heating oil and propane prices headed?

Over time, heating oil and propane prices tend to follow crude oil prices. As those who follow the news know, crude oil prices have moved up and down a great deal in the past several years.  Crude oil fell dramatically in 2008 because of the financial crisis and a worldwide recession that led to lower oil demand (lower demand = lower prices).  In 2010, as economies started to recover oil prices went up (more demand = higher prices).   Other factors such as speculation, growth in developing countries such as India and China, and concerns over supply from the Middle East can lead to price changes.

Oil prices have come down from over $110 in 2010 because the World economies are not growing as expected.  Will prices continue to fall or are they headed back up this Winter?  The US Energy Information Administration (EIA) expects the price of oil to stay close to current price levels through the winter. However, if projections for the major economies of the World get worse, oil prices are likely to fall.  If there are signs of an economic recovery such as more jobs or more economic growth, then oil prices will increase.

What Will Make Prices Go Up or Down?
Higher PricesLower Prices
• Higher than expected world economic growth
• A weaker US dollar
• Unrest in the Middle East
• Decreased OPEC production
• Lower than expected world economic growth
• A stronger US dollar
• A stable Middle East
• Increased OPEC production

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 or our Cap Pricing Program for our Atlantic Canada customers, that way 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 variable pricing.

 

5 Comments

Will Heating Oil and Propane Prices Drop this Summer?

Price protection is open and customers are calling us to inquire about locking-in their heating oil and propane prices.  For customers who locked-in last year, the first reaction we are getting is “Wow.  Propane and heating oil prices are much higher this year than last year.”  If you haven’t been following oil prices, the 30%+ increase since last summer can come as a shock.

Why have heating oil and propane prices gone up?

Crude oil prices rose to over $110 in April due to real and anticipated economic growth from around the world, concerns of oil supply from the Middle East, and speculation.  Since then prices have fallen to around $95 a barrel at the time of writing.

Where will heating oil and propane prices head this Summer?

Customers want to know what we think will happen to heating oil and propane prices this summer.  Will they go down?  Will August be a better time to lock in?

Many customers believe prices will fall, and that’s certainly a possibility.  Unfortunately, not even the most well regarded experts know where prices are headed.  Heating oil and propane prices may continue to go down this summer or they could go up.  There constantly seem to be surprises in the news that affect heating oil and propane prices (e.g. emergency release of crude oil inventory reserves, lower than expected OPEC production, lower than expected growth of the Chinese economy, etc).  Prices change with every new development and it’s hard to keep track of them all.

If you are interested, here are some factors that could make heating oil and propane prices go up or down this Summer.  For a more complete list and a very detailed understanding of what makes crude prices go up and down, you can go to the US Energy Industry Administration and check out their extensive information on factors affecting crude prices.

What Will Make Prices Go Up or Down?
Higher PricesLower Prices
• Higher than expected world economic growth
• A weaker US dollar
• Unrest in the Middle East
• Decreased OPEC production
• Lower than expected world economic growth
• A stronger US dollar
• A stable Middle East
• Increased OPEC production

Whether you choose to lock-in your heating fuel price or stay on a variable plan, you can take comfort in knowing that Irving Energy will provide you with the resources and information you need to make the best possible heating decision this heating season.

Check out our articles on heating oil and propane price protection consumer opinions, or answer the questions: is heating oil and propane price protection right for me? or what is heating oil and propane price protection?

Leave a comment