How Local Heating Oil Prices are Set
To understand the constant fluctuations of heating oil prices where you live, it's important to understand what factors influence the price of heating oil where you live.
The Source of Heating Oil
Heating oil comes from sources both inside and outside the United States. Regardless of where it comes from, heating needs to be refined by refineries within the United States. The U.S. imports most of its oil from the Virgin Islands, Canada and Venezuela. From the refineries to our homes the oil takes an interesting trip through pipelines, barges, trucks, and even by train in some cases. Refineries must balance what type of product they produce based on season, because they can't produce both gasoline and heating oil at the same time. For this reason, refineries store up heating oil for the colder seasons, however when gasoline demand is high, heating oil supplies at the beginning of the cold season are typically lower, driving prices up.
Why Heating Oil Prices Differ by Location
Many residents within the Northeast part of the country notice that home heating oil fluctuates even as you move from town to town. Often those differences don't seem to make sense, however they are based on a number of factors that, when they are all taken into consideration, make perfect sense.
The overall price is determined by the cost to produce the oil, how much it costs to distribute the oil to that particular part of the country, the costs of refining, and a small markup by dealers. According to the department of energy, these additional costs are estimated at about 46% of the overall cost of heating oil.
Most of the differences that people notice from region to region mostly involve distribution and competition.
Distribution: Areas that are more rural and difficult to get to will experience some of the highest prices of oil, because the cost of delivering the oil is more significant. However those locations in the country that are actually nearby refineries or major pipelines often enjoy much lower oil prices.
Competition: Even though the dealer markup is small, when there is enough competition in a certain area among oil dealers, this markup may shrink and costumers will see somewhat lower oil prices than surrounding communities.
How to Save on Heating Oil
History teaches consumers an important lesson about heating oil prices. The most powerful weapon a consumer has to fight high heating oil prices is purchasing power. By finding alternate fuels, we can reduce the overall price of heating oil permanently. Several ideas include:
- Better insulate your home
- Buy more fuel efficient vehicles
- Heat your home with other fuels
- Avoid buying products made with petroleum products
In addition to consumers' collective power to control demand, in the United States they also enjoy the power of a democracy. This means that consumers can direct their elected officials to make sure that alternative clean energies are researched and discovered. The only way the world will be able to detach from dependence on foreign oil, and the political and security ramifications that come along with that, is by changing how the country is fueled.
Visit CostOfOil.net for all kinds of information and resources about the current price of heating oil.
Related Tags: crude oil, oil prices, heating oil
Ryan Dube has been freelance writing for over 10 years for publishers both online and offline and has covered topics including the paranormal, finance, relationships, and more. Learn more at Invisible Inc.
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