World Crude Prices Continue to Fall; U.S. Oil Reserves at Highest Levels Since the mid-70s

December 9, 2014

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, December 8, 2014, and found the current statewide average cash price for No. 2 heating oil was $2.93 per gallon, dropping another six cents this week. The average statewide price for kerosene, $3.53 per gallon, was also six cents lower than last week. Propane prices, statewide, have also declined this week, dropping five cents to $2.78 a gallon (for heating customers). A year ago at this time, heating oil averaged $3.64 per gallon; kerosene, $4.04, and propane, $2.85.

Prices continue to fall worldwide due to flat demand and significantly increased U.S. production. Brent crude traded for just over $66 per barrel yesterday, while West Texas Intermediate (WTI) sold in the $63 range, the lowest price in five years. OPEC’s recent decision to maintain production levels, combined with the highest U.S. production in decades, means an oversupplied market. With oversupply, prices continue to decline. How much lower will prices go? Energy analysts continue to speculate, but many expect prices will be volatile until markets settle http://www.bloomberg.com/news/2014-12-09/oil-drops-as-deeper-opec-discounts-signal-fight-for-market-share.html .

Just how significant are current U.S. oil reserves? Late last week, the Energy Information Administration (EIA) released updated figures for total U.S. crude oil and lease condensate proved reserves (i.e., known oil and condensate feasible to extract with current technology and economic conditions). Reserves rose for the fifth consecutive year in 2013, increasing by 9% from the 2012 level to 36.5 billion barrels, according to the U.S. Crude Oil and Natural Gas Proved Reserves, 2013. This is the first time since 1975 that proved reserves have surpassed the 36 million barrel mark.

Continued development of the Bakken/Three Forks play in North Dakota accounted for a large portion of the reserves additions, and overall, tight oil plays accounted for almost 30% of all U.S. crude oil and lease condensate proved reserves. U.S. oil and natural gas production has transformed global energy markets. Using this week’s average heating oil price ($2.93), and converting to a common heating unit value (million Btu), the price of fuel oil is $21.13. This compares with an equivalent heating unit value for natural gas of $20.30 (at $2.03/therm); propane, $30.44 (at $2.78/gallon); kerosene $26.15 (at $3.53/gallon); wood pellets, $15.33 (at $253/ton); cord wood, $12.95 (at $285/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 8, 2014


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.93

2.87

2.99

2.92

2.90

3.03

High

3.30

3.25

3.15

3.20

3.30

3.05

Low

2.53

2.53

2.80

2.56

2.60

3.00

Kerosene

3.53

3.60

3.52

3.52

3.53

3.47

Propane

2.78

2.82

2.76

2.76

2.75

2.78

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 ($3.30) was found in one region in the state, and the lowest heating oil price ($2.53) was also recorded in one region. 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