The average price for home heating oil in the U.S. continues to lag behind the high of $3.22 per gallon on December 7, 2014. As of December 7, 2015, the price for a gallon of heating oil was $2.33. Home heating is derived from crude oil – which is also used to make fuel. The price of U.S. home heating oil is affected by the worldwide supply and demand. There are numerous factors affecting the current drop in prices. Here are 4 reasons why the price of home heating oil is expected to continue to drop for the foreseeable future.
Increased World Supply of Oil
There is currently a glut in the supply of crude oil. This means that producers are pumping more crude oil out of the ground then people are using right now, and the oversupply is driving down prices.
OPEC, the oil cartel made up of oil producing exporting countries in the Middle East, has recently decided to increase the amount of oil they produce for the world market, and this increase will further add to the glut in the oil supply and help to keep prices low.
Increased U.S. Crude Oil Supply
The U.S. continues to produce more oil daily from shale rock, through the use of fracking, than they did a year ago. This has supported the glut of crude oil in the United States. The main factor in the continued production of shale oil is that it is still economically feasible and profitable. For now, the production of shale oil continues to outpace last year's levels.
The demand for crude oil is expected to decrease, at least in the short term, at the same time the production of oil has increased. The lower demand will increase the current over supply even further.
One of the most important factors leading to the drop off in demand is the leveling off of demand by countries that have been seeing a surge in economic growth for the past few decades. China, for example, after years of increasing demand, has been seeing their consumption of oil leveling off since 2012.
Strong U.S. Dollar
OPEC oil is valued in U.S. dollars, and the current strength of the U.S. dollar also results in a higher cost for those countries whose currencies, or money, isn't as valuable as U.S. money.
Those countries with lowered value money than U.S. money will have to spend more for crude oil than if the U.S. dollar was weak, and this lowers the demand for oil in those countries due to the higher prices they are paying. The end result is that a strong U.S. dollar helps to increase the oversupply of crude oil worldwide.
For more information, contact Bay State Fuel Oil Inc or a similar company.