Energy Guides

Heating oil prices

Wednesday 26 August 2009

By Garnet Roach - garnet@consumerchoices.co.uk

If you’ve got an oil heating system in your home then you’ll want the best deal on kerosene.

Linked to crude oil prices, home heating oil costs have seen a dramatic fall since summer 2008 when crude oil prices peaked at over $140 a barrel.

Average heating oil prices across the UK have increased by around 4.5p per litre since May 2009, though prices dipped in July.

Factors affecting heating oil prices

The kerosene that you burn to heat your home is refined from crude oil. This means that because heating oil costs are linked to the price of crude oil, a variety of factors affect prices.

The price of crude oil

As with all products, supply and demand is one of the big factors affecting heating oil prices. As well as the need to heat our homes, heating oil costs are affected by the demand for fuel to run cars, delivery vehicles and flights.

Poor economic conditions mean that people spend less on cars, petrol and holidays, so reducing the demand for fuel and theoretically bringing down costs. However the price of crude oil depends on supply and demand across the world, not just in the UK – demand could easily increase in some countries while others experience a downturn.

Also, because crude oil is sold in US dollars, a weak pound means that you are buying less oil for your money.

It’s not just the economy that can affect supply and demand for crude oil, and the cost of heating oil. Political unrest and even extreme weather can both push up the cost of crude oil. For example, the cost of crude oil rose ahead of the tropical storm Gustav in 2008 as staff in the Gulf of Mexico were evacuated from oil rigs.

Other factors affecting heating oil prices

Because crude oil has to be refined to make your heating oil, there are other costs involved. The price you pay needs to cover this cost and allow your distributor to make a profit after paying for delivery to your home, the cost of drivers, office staff and other operating overheads.

Seasonal fluctuations

Generally, the price of heating oil should be lower in the summer months, when the weather is warmer and there is less demand. As it gets colder demand will increase and there may even be severe weather warnings that could cause people to panic buy, pushing the price up.

If you live in a remote rural area you will also have to pay more to have your heating oil delivered. There might also be fewer suppliers to choose from, reducing competition and usually resulting in higher prices.

Top tips to cut the cost of heating oil

While heating oil is a necessity if you have a heating oil system, there are things that you can do to keep costs down.

• Compare heating oil prices. By comparing suppliers you can find the best deal on the market.
• Invest in a larger tank. This will allow you to stock up on heating oil during the summer when costs are usually lower, and simply top up when prices dip, rather than waiting until the last minute and paying a premium price in winter when demand is high.
• Group buy your heating oil. Rally your neighbours round and bulk order your heating oil. You will get a better price if you buy more and will also be able to save on transport costs.
• Insulate your home. The Government offers grants for cavity wall and loft insulation, keeping more heat in your home so you use less fuel. Visit the Energy Saving Trust website to find out what’s available.
• Make energy saving changes. Simple but effective measures such as turning your thermostat down or putting your heating system on a timer can make a huge difference to the amount of heating oil you use.

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