In a year when the heating oil prices were expected to remain stable, they have been rising and this has left us all asking Why? The short answer is supply, demand and speculation. While the colder temperatures this winter have some influence on the market price of oil, temperature is not the only factor that affects oil cost per barrel. Tevis Energy, like other fuel companies, purchases from the market and is subject to its price fluctuations.
What is OPEC?
OPEC is the Organization of the Petroleum Exporting Countries, and is an intragovernmental organization from countries all over the world whose objective is to secure fair trading prices for their product and maintain a fair return on capital to their investors. Additionally, the OPEC alliance is to keep product supply in line with demand of consumers.
Why are home heat oil prices rising?
Supply and Demand
Last year, oil prices hit a four-year low. The drop in price was caused by a global surplus and there was extra oil in reserves. Despite the surplus, countries continued to produce at levels above normal production, even though the value was in turn, dropping. This was great for our customers because the heating oil prices dropped. However, because of the over production, economically, oil producing countries were losing value per barrel.
Upon the news of OPEC’s pending December, 2016 meeting, during which there was to be a vote to slow down production, the market began anticipating a drop in supply. This speculation caused oil prices to begin creeping up, even before the OPEC vote. The speculation was supply would decrease, which caused prices to continue an increase per barrel.
At the December 2016 meeting, OPEC did vote to slow down supply production.
This week the speculation is that some countries are not adhering to the production slow down from last month’s OPEC meeting. Which could put downward pressure on prices.
What will happen next week or next month? We will have to wait and see. What we do know is more information will be available after OPEC’s next scheduled meeting on January 20th!
No matter where oil prices go, Tevis Energy is committed to bringing our customers the highest quality heating fuel at the lowest cost possible. We proudly serve Central Maryland and South Central Pennsylvania.
US Energy Information Administration (EIA)
Organization of the Petroleum Exporting Countries (OPEC)
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