Oil Prices Projected to Remain Low into 2015

December 30, 2014

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, December 29, 2014, and found the current statewide average cash price for No. 2 heating oil was $2.75 per gallon, another four cents lower than last week. The average statewide price for kerosene, $3.35 per gallon, was two cents lower. Propane prices increased slightly, gaining two cents to $2.75 per gallon (for heating customers). A year ago at this time, heating oil averaged $3.76 per gallon; kerosene, $4.16, and propane, $3.06. Heating oil prices, statewide, have dropped 27% since this time last year. World crude oil prices remain in the $53 (WTI) to $58 (Brent) per barrel range, the lowest prices in 5 years. Current estimates of oil production (worldwide) indicate that supply exceeds demand by 2 million barrels/day. U.S. oil inventories remain at their highest levels since the early 80s, and U.S. oil drillers are now idling some oil rigs. Energy analysts speculate that the supply glut will continue well into 2015 http://www.bloomberg.com/news/2014-12-30/oil-trades-near-5-year-low-as-opec-strategy-seen-worsening-glut.html . And, although individual OPEC member nations have called for production cuts, OPEC collectively continues to produce just over its 30 million barrel/day target.

This significant change in oil markets has caused analysts to adjust their forecasts on energy prices and fuel expenditures this heating season. In its December Short-Term Energy Outlook (PDF) (STEO), the Energy Information Administration (EIA) expects that average heating oil expenditures by households that use oil as their primary heating fuel during the 2014-15 winter will be 27% ($632) below last winter's expenditures. Heating oil prices have declined with crude oil prices, and the EIA expects U.S. heating oil prices to average $3.09 per gallon (gal) this winter, 20% lower than last winter, and 15% lower than expected in the October Winter Fuels Outlook (PDF) (see table below).

This is consistent with prices and expenditures we are seeing in Maine. The season began with a statewide average heating oil price of $3.29 per gallon, and this week the average price is down to $2.75. So, for example, if one assumes a season long price of $2.90 per gallon, and an average heating season consumption of 850 gallons, the savings over last year’s average price ($3.71) is $685.

Using this week’s average heating oil price ($2.75), and converting to a common heating unit value (million Btu), the price of fuel oil is $19.83 This compares with an equivalent heating unit value for natural gas of $20.30 (at $2.03/therm); propane, $30.11(at $2.75/gallon); kerosene $24.81 (at $3.35/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 29, 2014


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.75

2.67

2.86

2.72

2.71

2.93

High

3.19

3.19

3.05

3.00

3.00

2.95

Low

2.30

2.30

2.60

2.35

2.35

2.90

Kerosene

3.35

3.40

3.38

3.27

3.35

3.34

Propane

2.75

2.75

2.78

2.65

2.89

2.71

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 ($3.19) was found in one region in the state, and the lowest heating oil price ($2.30) 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