Why Did the Price of Heating Oil Get So High?

Understanding the Energy Markets & Price Fluctuations

As the past two years have taught us, our planet is extremely interconnected. What happens in one part of the world usually has a ripple effect that’s felt elsewhere. Fortunately, spring is here and your need for heating oil will be decreasing as the weather warms up, but if you’ve recently paid for heating oil for your South Shore home, you’ve probably noticed an increase in the price.

Why the increase? Global crude oil prices soared to over $100 per barrel for the first time in eight years after Russia invaded Ukraine in late February. As you probably know all too well by now, as the price of crude oil goes, so goes the many other products derived from it. And heating oil is no exception.

Even before the war in Ukraine further accelerated price increases, consumer spending trends—combined with persistent supply shortages—had already sent inflation rates in the U.S. to their highest levels in 40 years. 

Russia’s Role

Russia is impossible to ignore because it is the third-largest petroleum and liquid fuels producer in the world behind the United States and Saudi Arabia. It’s a major exporter of both crude oil and natural gas.

For weeks, energy prices had been rising in anticipation of the potential sanctions that could be levied on the Russian energy sector if the country went ahead and invaded Ukraine. In the frenzied world of investment, this is known as the “fear factor.” Even the hint of a possible disruption in energy supply will heavily influence the actions of commodities traders.

Once Russia invaded, the U.S. was the first country to place a ban on Russian oil and petroleum products, which accounted for about 7% of U.S. imports in 2020.

And here’s where the fear factor played an additional role. While Russian oil imported into the U.S. isn’t a significant percentage, the prospect of Europe eventually joining the U.S. in banning Russian energy imports would leave a big void to fill, and those who make their living in the oil markets don’t like that level uncertainty. This includes the speculators (who are betting on price moves) and the hedgers (who are limiting risk for their clients).

Now What?

We don’t know where things will go from here, but just like you, we hope this spike is only temporary. When the price of heating oil goes up, it hurts your budget and digs into our profits.

Even though the market is experiencing a lot of volatility right now, Scott Williams remains committed to delivering for our customers and selling our heating oil at a fair price. So whether you’re in Suffolk, Norfolk, or Plymouth County, you can trust us to deliver for you—no matter what’s happening in the world. Click here to see if you live in our service area.

Scott Williams offers our customers reliable heating oil deliveries and flexible payment options. Contact us today to learn more about how we can keep you comfortable and save you money.