Oil Prices Continue to Fall; Lowest Prices Seen Since 2008

December 2, 2014

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, December 1, 2014, and found the current statewide average cash price for No. 2 heating oil was $2.99 per gallon, dropping another 4 cents this week. The average statewide price for kerosene, $3.59 per gallon, was three cents lower than last week. Propane prices remained steady, fluctuating only a cent or so over the last several weeks. This week, the statewide average is $2.83 per gallon (for heating customers). A year ago at this time, heating oil averaged $3.61 per gallon; kerosene, $4.00, and propane, $2.77.

The dramatic decline in heating oil prices this year is nearing the magnitude of the winter of 2008-2009, when financial markets collapsed, causing worldwide demand for oil to shrink. The season began in October 2008 with prices in the vicinity of $3.50 per gallon; by March of 2009, prices had fallen to just over $2.00 per gallon. Although it is unlikely that prices will fall to that level without further economic contractions, energy market analysts predict that heating oil prices will continue to fall this year. OPEC’s decision last week to fight for its global market share rather than cut production, has caused crude oil prices to continue falling. West Texas Intermediate (WTI) fell briefly below $65 a barrel, and Brent approached $65 before recovering slightly. With predictions of further declines, the oil market has been described by some as the first ‘free fall in decades’ http://www.bloomberg.com/news/2014-11-30/oil-at-40-possible-as-market-transforms-caracas-to-iran.html

According to Bloomberg, global energy markets ‘have been upended by an unprecedented North American oil boom’, and other countries did not plan for the result. This is very likely to have a significant negative impact on the economies of all oil exporting nations, but particularly devastating to Russia, Iran, Nigeria, and Venezuela, who are suffering from economic sanctions, political turmoil or failing economic policies. Economic problems were masked for years by the profits from $100 a barrel oil.

However, U.S. shale oil is more expensive to extract than Saudi oil, so it remains to be seen what will happen if prices continue their downward slide. For the immediate future, though, Mainers will continue to pay much less for heating oil and gasoline at a time when temperatures are colder, and the holiday season nears.

Using this week’s average heating oil price ($2.99), and converting to a common heating unit value (million Btu), the price of fuel oil is $21.56. This compares with an equivalent heating unit value for natural gas of $18.82 (at $1.88/therm); propane, $30.99 (at $2.83/gallon); kerosene $26.59 (at $3.59/gallon); wood pellets, $15.33 (at $253/ton); cord wood, $11.36 (at $250/cord) and electricity, $46.89 (at 16 cents per kwh).
These fuel-only prices do not take into account the type of heating system, nor its efficiency. For example, the electricity cost is for traditional baseboard heat. Other electric heating technologies, such as heat pumps and electric thermal storage (ETS), may offer consumers energy savings. Cold climate heat pumps, a recent technological advancement, are much more efficient than baseboard electric heat, so total energy costs are lower than many other types of heating fuels. ETS offers savings by utilizing off-peak electric rates, available in many areas of the state.

The Energy Office has a calculator on its web site that allows consumers to obtain more detailed estimates of home heating costs, and the price impacts of various types of fuel, heating systems and heating appliances. Heating costs vary considerably from home to home. The home heating calculator can assist homeowners in finding the best heating option for their home, location, lifestyle, and budget http://www.maine.gov/energy/index.html

As of December 1, 2014


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.99

2.92

3.07

2.99

2.94

3.15

High

3.40

3.34

3.40

3.30

3.30

3.20

Low

2.60

2.60

2.80

2.64

2.60

3.10

Kerosene

3.59

3.66

3.59

3.53

3.56

3.56

Propane

2.83

2.83

2.78

2.77

2.99

2.81

It is important to note that the price for heating oil is a statewide average, and that prices in a given geographic region of the state may be considerably higher or lower than this average. This week, within the Energy Office sample, the highest heating oil price ($3.40) was found in one region in the state, and the lowest heating oil price ($2.60) was also recorded in two regions. Also, the statewide average price for propane is based on a use of at least 900 gallons a year. Households using propane just for cooking or hot water generally pay a higher per gallon price. The table above provides current Maine cash prices in dollars rounded to the nearest penny.

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For Immediate Release

Contact:
Lisa Smith
(207) 624-7445
lisa.j.smith@maine.gov