OPEC Members Agree to Small Crude Oil Production Cut; Existing World Supply Glut Makes Effect on Heating Oil Prices Unclear

November 30, 2016

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, November 28, 2016, and found the current statewide average cash price for No. 2 heating oil was $2.04 per gallon, up two cents from last week. The average statewide kerosene and propane prices also increased two cents from the week before, now at $2.56 and $2.31 per gallon, respectively.

Today, the Organization of Petroleum Exporting Countries’ (OPEC) announced they would implement an overall production cut to 32.5 million barrels a day, which is almost a million barrels less than current production (33.6 million). http://www.wsj.com/articles/opec-reaches-deal-to-cut-oil-production-1480518187 http://www.bloomberg.com/news/articles/2016-11-14/opec-said-to-start-final-diplomatic-push-to-heal-oil-cut-divide

The graph below illustrates the level of production in countries belonging to OPEC.

According to the Wall Street Journal, the Saudi Arabia Energy Minister Khalid al-Falih stated that any deal would have to include the cooperation of other, non-OPEC producers (e.g., Russia) in order to have any long term price impact. No agreements on the part of non-cartel producers have been made, and the details of each OPEC member’s contribution to the production target have also not been released. In addition, excess inventories globally will also provide a check on significant price increases, at least in the short term. So, despite this announcement, it is still unclear whether or not there will be any meaningful price impacts which translate into increased heating fuel prices for Mainers.

Using this week’s average heating oil price ($2.04), and converting to a common heating unit value (million Btu), the price of fuel oil is $14.71. This compares with an equivalent heating unit value for cord wood of $11.36 (at $250/cord); natural gas of $14.14¹ (at $1.41/therm); wood pellets, $15.82 (at $261/ton); kerosene $18.96 (at $2.56/gallon); propane, $25.29 (at $2.31/gallon); and electricity (electric baseboard), $38.10 to $55.69 (at 13-19 cents per kwh). However, fuel prices are only part of the calculation when determining which fuel will save you more money over the course of a heating season. The type of heating system, as well as its efficiency, is also an important factor in determining final costs. The Energy Office has a calculator on its web site that allows consumers to explore these fuel options further, as well as compare efficiencies of heating systems most closely matching their own system. 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 . Efficiency Maine also has a calculator on its website that can help consumers evaluate their heating options http://www.efficiencymaine.com/at-home/home-energy-savings-program/heating-cost-comparison/

As of November 28, 2016


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.04

1.99

2.10

2.04

1.98

2.20

High

2.35

2.20

2.35

2.15

2.20

2.30

Low

1.80

1.80

1.85

1.80

1.80

2.15

Kerosene

2.56

2.61

2.56

2.53

2.49

2.63

Propane

2.31

2.30

2.35

2.23

2.26

2.46

The price for heating oil is a statewide average; 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 ($2.35) was found in one region in the state, and the lowest heating oil price ($1.80) was found in three regions. Also, the statewide average price for propane is based on consumption 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.


¹ natural gas prices reflect some non-peak heating season supply costs; prices will be higher as the heating season progresses

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For Immediate Release

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