Heating Oil Prices Rise Significantly During Short-Lived Crude Market Rebound

February 24, 2015

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, February 23, 2015, and found the current statewide average cash price for No. 2 heating oil was $2.79 per gallon, up nineteen cents from two weeks ago. The average statewide price for kerosene also increased over the last two weeks, and is now $3.31 per gallon, seventeen cents higher. Average propane prices rose as well, but only a few cents, to $2.71 (for heating customers). These increases have been the first significant price hikes for almost 8 months. However, prices are still far lower than they were at this time last year; during this week in 2014, heating oil averaged $3.87 per gallon; kerosene, $4.32, and propane, $3.53.

While this recent surge in prices has been significant, it may be a short-lived one, and it is important to view it in perspective to the historic collapse of crude oil prices last year. Heating oil prices tend to lag behind crude oil market fluctuations by two to three weeks, so prices we are observing now are most likely the result of a rally in crude oil prices over the last few weeks. Some OPEC members (the Organization of Petroleum Exporting Countries) had expressed a desire to stem the continued decline in world prices, but others, such as Saudi Arabia, are uninterested in altering production targets in an attempt to bolster prices http://money.cnn.com/2015/02/24/investing/opec-emergency-meeting-oil-saudi/index.html . Prices initially rallied amidst talk of an OPEC meeting, then fell once again http://www.bloomberg.com/news/articles/2015-02-23/oil-continues-to-fall-and-opec-isn-t-helping . Today, WTI (the North American benchmark crude) is trading close to $50 a barrel. Brent oil (the European benchmark) is faring slightly better at $60 a barrel, but global prices have not recovered to the degree some OPEC producers are hoping for.

There are several factors working against sustained price increases. OPEC nations would have to all agree to cut production, an unlikely scenario as it would mean shrinking the market for already struggling OPEC members; the U.S., despite idling some oil rigs, is pumping out more oil than it has since the early 70s; U.S. oil inventories have reached the highest levels in 80 years; and worldwide demand remains flat http://www.bloomberg.com/news/articles/2015-02-20/another-big-reason-to-think-oil-prices-aren-t-going-up-soon

Using this week’s average heating oil price ($2.79), and converting to a common heating unit value (million Btu), the price of fuel oil is $20.12. This compares with an equivalent heating unit value for natural gas of $19.40 (at $1.94/therm); propane, $29.67 (at $2.71/gallon); kerosene $24.52 (at $3.31/gallon); wood pellets, $15.33 (at $253/ton); cord wood, $12.95 (at $285/cord) and electricity, $43.96 (at 15 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 February 23, 2015


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.79

2.74

2.83

2.83

2.73

2.87

High

3.00

2.99

3.00

3.00

3.00

3.00

Low

2.60

2.60

2.65

2.60

2.60

2.75

Kerosene

3.31

3.33

3.28

3.32

3.31

3.25

Propane

2.71

2.73

2.71

2.65

2.76

2.66

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 ($3.00) was found in four regions in the state, and the lowest heating oil price ($2.60) was recorded in three 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