Downward Pressure on Global Crude Oil Prices Keeping Heating Fuel Prices in Check

August 17, 2017

Augusta, Maine – The Governor’s Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, August 14, 2017, and found the current statewide average cash price for No. 2 heating oil was $2.03 per gallon, 7 cents higher since mid-July. The average statewide kerosene price ($2.56 per gallon) is also up, 4 cents higher than a month ago. Propane prices have been relatively steady; the average statewide price (for heating customers) is $2.36 per gallon, one cent higher than in mid-July.

Although heating fuel prices are higher than mid-summer lows, global oil prices remain in check as the Organization of Petroleum Exporting Countries (OPEC) experiences setbacks in their attempt to reduce production from their members and voluntary agreements by Russia. Production cutbacks established last November have been undermined by increased output from OPEC members exempt from the deal -- Libya and Nigeria – as well as increasing production from U.S. shale producers https://www.bloomberg.com/news/articles/2017-08-15/opec-s-oil-glut-fight-morphs-from-skirmish-to-campaign-of-years

As a result, OPEC’s current production -- about 32.8 million barrels a day in July -- is higher than the amount needed for most of next year, according to the International Energy Agency (IEA). This oversupply situation is reflected in the graph below.

This global oversupply situation will maintain downward pressure on crude prices, and, therefore, heating fuel prices as well. Propane may be the exception, as prices today are shaped more by domestic supply and demand, as well as export demand, than global energy markets. The United States now exports significant amounts of propane, so export levels, winter weather, available storage, and agricultural crop drying demands have the greatest influence on propane prices. As the graph (below) from the U.S. Energy Information Administration indicates, currently propane stocks nationally are on the low side compared to previous years, but still within the 5 year average range.

The following table 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 Btu¹

Fuel Price (in dollars) Fuel Price (dollars per million Btu)
Cord Wood ($250/cord) $11.36
Natural Gas ($1.31/therm) $13.05
Heating Oil ($2.03/gallon) $14.64
Wood Pellets ($261/ton) $15.82
Kerosene ($2.56/gallon) $18.96
Propane ($2.36/gallon) $25.84
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 August 14, 2017


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.03

1.99

2.02

2.07

1.98

2.17

High

2.41

2.13

2.10

2.41

2.18

2.20

Low

1.80

1.80

1.85

1.85

1.80

2.10

Kerosene

2.56

2.59

2.53

2.57

2.51

2.69

Propane

2.36

2.36

2.38

2.25

2.42

2.45

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 $2.41, and the lowest heating oil price found was $1.80. 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 Does not factor in the efficiency of the heating system

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For Immediate Release

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