Cold Weather and Tighter Supplies Keep Heating Oil Prices Flat

December 12, 2018

Augusta, Maine - The Governor's Energy Office (GEO) conducted its weekly heating fuel price survey on Monday, December 10, 2018, and found the current statewide average cash price for No. 2 heating oil was $2.96 per gallon, down 5 cents since early November. The average statewide kerosene price is six cents lower, now at $3.55 per gallon. Propane prices (for heating customers) have remained essentially the same - $2.88 or $2.89 - since late October. The table below shows prices since late October, when prices peaked, and the difference in prices between this heating season and 2017-18.

Date Maine Average Heating Fuel Prices,
per Gallon
Heating Oil Kerosene Propane
10/29/18 $3.02 $3.62 $2.88
11/5/18 $3.01 $3.61 $2.89
11/13/18 $3.02 $3.61 $2.88
11/19/18 $3.01 $3.60 $2.89
11/26/18 $2.99 $3.58 $2.88
12/3/18 $2.97 $3.54 $2.88
12/10/18 $2.96 $3.55 $2.89
avg. 2017-18 heating
season price
$2.59 $3.22 $2.70

Crude oil prices remain at the $51(WTI) to $60(Brent) per barrel mark, a decline of approximately 30% since mid-October. Most of this decline occurred during the month of November. Brent crude oil (the European benchmark) spot prices averaged $65/barrel in November, down $16/barrel from October. This was the largest monthly average price decline since December 2014 EIA Short term Energy Outlook, 12/11/18 . So why isn't heating fuel declining at the same rate as crude oil prices? There are many market forces - local, regional, and global - that affect the final price of heating fuels (heating oil; k-1, and propane) in Maine. The price of crude oil is a significant component of the cost of heating oil and other heating fuels (see figure below).

However, these components - crude oil, refining costs & profits, and distribution/marketing - are not the only market forces impacting the final price of heating fuel delivered to Maine homes. Below are just some of the additional factors affecting the price Mainers pay for heating oil and other petroleum-based fuels:

  • Time of year
  • Weather
  • Other local, regional, international demands on existing supplies
  • Domestic production levels
  • Export markets
  • Refinery operations (ratio of capacity allocated to heating oil versus gasoline; unplanned outages)
  • Global events (e.g., OPEC production decisions; US economic sanctions on oil producing countries; economic collapse of an oil producing country, resulting in vastly reduced production)
  • Local competition at retail level

 At this point in the heating season, several of the above market forces are affecting prices.

  • Domestic inventories are lower than usual. According to the Energy Information Administration’s (EIA) Short Term Energy Outlook released yesterday, U.S. distillate inventories remain 10% lower than the five-year average.
  • The weather is cold, so demand is high. November’s temperatures were the colder for the month than they’ve been for the last four years.  EIA estimates that U.S. distillate consumption last month was the highest for the month of November on record , averaging 4.2 million barrels/day.
  • On December 7th, The Organization for Petroleum Exporting Countries (OPEC) agreed to further production cuts. OPEC members, as well as some non-members, made this decision in an effort to keep crude oil prices from falling further. This type of action introduces uncertainty into global markets, causing significant price volatility. This ultimately affects retail prices.
  • Refinery operations have been focused more on gasoline production than diesel and heating oil. Recent data indicate lower domestic and international demand for gasoline, and this lowered demand has resulted in lower gasoline prices (thereby reducing profits). On the other side of refinery operations, there is an increased demand for heating fuel (cold weather). As a result, refineries may seek to increase production of heating oil and diesel relative to gasoline.
  • Good news: Record domestic oil production has, for the first time in 75 years, made the U.S. a net oil exporter (at least for last week). https://www.bloomberg.com/news/articles/2018-12-06/u-s-becomes-a-net-oil-exporter-for-the-first-time-in-75-years .

While this news doesn't have an immediate impact on Maine's heating fuel prices, it does indicate an overall reduced reliance on imported oil to meet our energy needs.

Below is a table of prices collected for various regions of the state.

Maine Retail Heating Fuel Prices, as of December 10, 2018


Heating Oil

Statewide

Southwest

Central

Eastern

Western

Northern

Average

2.96

2.97

3.02

2.92

2.94

2.95

High

3.50

3.45

3.50

3.50

3.45

3.10

Low

2.49

2.49

2.80

2.53

2.70

2.90

Kerosene

3.55

3.64

3.57

3.49

3.50

3.50

Propane

2.89

3.08

2.82

2.88

2.66

2.66

The following table compares the prices between various heating fuels, and converts these prices to a common heating unit value (dollars per million Btu). For the first time this season, the price of natural gas (dollars per million Btu) has risen above that of the average wood pellet fuel price.

Comparison of Heating Fuel Prices per Million Btu (December 10, 2018)

Fuel Price (in dollars) Fuel Price (dollars per million Btu)
Cord Wood ($275/cord) $12.50
Wood Pellets ($268/ton) $16.24
Natural Gas ($1.73-$2.31/therm) $17.30-$23.10
Heating Oil ($2.96/gallon) $21.34
Kerosene ($3.55/gallon) $26.52
Propane ($2.89/gallon) $31.64
Electricity - baseboard (14-17.5 cents/kwh) $42.50-$51.29
Electricity - air source heat pump (5.2-6.5 cents/kwh)** $15.24-$19.05

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 and its efficiency are also important factors in determining final costs. The Energy Office has a calculator on its website 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 to help consumers evaluate their heating options http://www.efficiencymaine.com/at-home/home-energy-savings-program/heating-cost-comparison/ .

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 $3.50, and the lowest heating oil price found was $2.49. 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