What Affects Heating Oil Prices?
UK heating oil prices can vary from day to day and there are many reasons for this fluctuation. If you are wondering when the best time to purchase oil is, or what contributes to the change in price, this page will hopefully answer all the questions you have.
There are many factors that affect the price of heating oil, ranging from something as simple as what the weather is like outside your home, to factors that are on more of a global level, such a politics and foreign exchange rates. Below is a breakdown of what affects the price of heating oil.
Seasons & Weather
The conditions outside are one of the biggest factors when discussing what affects the price of heating oil. As the temperature drops in the UK you will find that more and more heating oil is needed to keep homes warm. As a result of the increase in demand, the price of heating oil rises also and typically stays at a high rate throughout the winter months. The opposite occurs as the warmer seasons arrive. There is less demand for heating oil and so the price decreases and stays at a lower rate.
Local Supply & Demand
The fluctuation of heating oil prices locally usually depends on a supplier’s location in relation to the storage facility or refinery and the distance to your home. Rural areas can also sometimes see higher costs due to potential issues with access, particularly in winter.
National Supply & Demand
The supply and demand for kerosene will impact the price of heating oil nationally. Larger weather conditions such as storms or blizzards that span whole regions can hinder supply and will result in a temporary rise in heating oil prices. Kerosene is also used in producing ultra-low sulphur diesel, so when ULSD is in high demand, this also affects kerosene prices.
Global Supply & Demand
If the demand for heating oil remains the same but the production decreases on a global level creating a shortage, the price of heating oil will not only increase in the UK but all over the world. Other major factors in price fluctuations occur when conflicts arise between OPEC countries, as this can lead to concerns over supply, resulting in higher rates. Foreign exchange rates also play a big part, as the UK imports a vast amount of heating oil from other countries every year and as a result the exchange rates can make the price of heating oil vary.
Delivery of Heating Oil
As noted in the local section of what affects the price of heating oil, delivery costs can vary depending on how far away your home is from the nearest storage facility or refinery. It also can depend on the cost of road diesel that fuels the delivery tankers and the size of the vehicle that is needed to deliver to your property. A smaller vehicle holds a smaller quantity and needs to fill up more regularly meaning there is a higher transport cost per mile. Another major factor is if you live in a rural location, as these areas can be difficult to access, especially in the winter months.
You can find information regarding Fuelfighter’s delivery options here.
Price of Crude Oil
Kerosene is refined from crude oil, which means that if the price of crude oil increases, so will the price of kerosene. The actual cost to refine kerosene from crude oil can also vary, again potentially increasing or decreasing the price of home heating oil.
Value added tax or as it’s more commonly known VAT, is a consumption tax that is added to your heating oil bill just like it is with many other items purchased in everyday life. The standard rate for VAT is 20% but with heating oil it’s much lower, at only 5% for domestic users.
If you have any additional questions surrounding heating oil prices, please get in touch and we will happily help in any way we can.