Heating Fuel Prices Up Since OPEC Announcement to Curtail Oil Production; Longer Term Price Impact Uncertain

December 15, 2016

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, December 12, 2016, and found the current statewide average cash price for No. 2 heating oil was $2.15 per gallon, up eleven cents (5.4%) over the last two weeks. The average statewide kerosene and propane prices also increased over the last couple of weeks. The average statewide kerosene price increased ten cents (3.9%) and is now at $2.66 per gallon. The average propane price is also up, but not as much as oil and K-1. The average statewide price, for heating customers, is now $2.35 per gallon, four cents (1.7%) higher than two weeks ago.

On November 30th, the Organization of Petroleum Exporting Countries’ (OPEC) announced they would implement an overall production cut to 32.5 million barrels a day, over a million barrels less than current production. Since that announcement, crude oil prices globally have risen to a range of between $52 (West Texas Intermediate, or WTI) and $55 (Brent) per barrel. However, uncertainty surrounds the actual implementation of such a production cut, including the willingness of outside producers to deliver on production cut promises. In addition, on Wednesday the US Energy Information Administration released data on crude oil inventories, which remain quite high despite more localized inventory reductions http://www.reuters.com/article/us-global-oil-idUSKBN14305C

This uncertainty is reflected in both WTI crude oil prices and heating oil prices, shown in the two graphs on the next page. The first graph depicts the price, in dollars, of a barrel of crude oil on the NYMEX commodity futures exchange over the last three months. The second graph illustrates the wholesale price of heating oil, per gallon, delivered into New York. Both crude oil and heating oil prices spiked in the days after the November 30th announcement, and have since begun to ease a bit over the last few days.

Commodity Futures Price Quotes graph

Heating Oil Futures graph

It is clear that prices are volatile, and Mainers are particularly exposed to this volatility, due to our high reliance on oil for heating and transportation.

The table below compares the prices between various heating fuels, and converts these prices to a common heating unit value (dollars per million Btu).

Comparison of Heating Fuel Prices per Million Btu*


Fuel Price (in dollars) Fuel Price (dollars per million Btu)
Cord Wood ($250/cord) $11.36
Natural Gas ($1.45/therm) $14.53
Heating Oil ($2.15/gallon) $15.50
Wood Pellets ($261/ton) $15.82
Kerosene ($2.66/gallon) $19.70
Propane ($2.35/gallon) $25.73
Electricity (baseboard) (15-18 cents/kwh) $43.94-$52.75

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 December 12, 2016


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.15

2.12

2.19

2.16

2.07

2.26

High

2.45

2.30

2.45

2.34

2.25

2.35

Low

1.86

1.90

1.90

1.90

1.86

2.20

Kerosene

2.66

2.71

2.66

2.65

2.58

2.71

Propane

2.35

2.35

2.39

2.26

2.31

2.52

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 found was $2.45, and the lowest heating oil price found was $1.86. 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.

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For Immediate Release

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