OPEC’s Decision To Reduce Production & Its Effect On You
If you heat your home with heating oil, then you have experienced the fluctuating prices of heating oil. This is noticeable every time that you fill your oil tank and it can especially be obvious from one season to another.
For the last couple of years, many of us have enjoyed low heating oil prices. Consequently, we have enjoyed reduced home heating expenses. However, OPEC has decided to reduce global supplies. It is important to know how home heating oil prices are determined and what a decision like this means for you.
In this article, we will discuss this what affects the price of home heating oil, who OPEC is, and how a decision to reduce production affects you. We also cover what you can do to reduce your home heating costs.
How Are Heating Oil Prices Determined?
Heating oil prices can change from one season to another. Many consumers who use fuel oil understand that it is important to know what factors determine the price. They also understand the need to be aware of what is predicted for the upcoming season. This allows homeowners to have an idea of how to budget for the upcoming heating season. There are four main categories that affect heating oil prices.
Seasonality
When crude oil prices are stable, then heating oil prices have a tendency to go up during the winter months. Basically, when demand for heating oil is high, then you will pay more for heating oil. A warm winter will reduce demand and prices will fall.
The Cost Of Crude Oil
The current cost of crude oil impacts the price that is set for heating oil. In an article by the U.S. Energy Information Administration, they discuss this in further detail:
Crude oil prices are determined by worldwide supply and demand. Demand can vary worldwide based on the economy and weather in addition to other factors. Supply can be influenced by weather events in the United States and by political events in other countries. The supply of oil produced by members of the Organization of the Petroleum Exporting Countries (OPEC) can also affect world crude oil prices.
Click here to see the rest of this article.
Local Markets
The amount of heating oil delivery companies in your area affects the cost of fuel oil. This is because there is competition in local markets. If there are many suppliers, then your heating oil will be cheaper. That being said, many homeowners who live in remote areas tend to pay more.
Operating Costs
Every company has to pay overhead expenses to keep their business running. This includes fuel costs for deliveries, insurance coverage, employee wages, training for employees, etc. This varies from one company to another.
The biggest factor that really affects heating oil prices is simply supply and demand. When the winter is cold and supplies are being used rapidly, prices rise. Because, storage is being used faster than it can be replenished. Sometimes heating oil needs to be delivered to places like the Northeast from Europe or the Gulf Coast, for example. This also causes a surge in prices.
Who Is OPEC?
OPEC, the Organization of the Petroleum Exporting Countries, is an organization that was formed in 1960 of all of the world’s top oil exporters. Its mission is:
The purpose of OPEC for members is to “coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”
- OPEC members collectively supply about 45% of the world’s crude oil production.
- Together, OPEC members control about 81% of the world’s total proven crude reserves.
- OPEC member countries monitor the market and decide collectively to raise or lower oil production in order to maintain stable prices and supply.
- A unanimous vote is required on raising or lowering oil production.
- Each member country controls the oil production of its country, but OPEC aims to coordinate the production policies of member countries.
Click here to see the rest of this article.
OPEC’s Decision To Reduce Oil Production
OPEC plays a major role when it comes to what you pay for your fuel oil prices. As mentioned earlier, OPEC has decided to reduce production of crude oil for the first time in 8 years. It will now produce 32.5 barrels a day instead of 33.8 and will take effect on January 1, 2017.
This decision came about for the purpose of stabilizing the market especially since crude oil prices have significantly dropped by over 50% in the past 2 years. Prices dropped due to oversupply and the booming shale production by the United States. Two years ago, crude oil was priced at $100 a barrel and went down to $50 a barrel.
At the beginning of 2016, it went as low at $30 a barrel. After news reports on Wednesday, November 30th, oil prices rose to over $49 a barrel. Non-Opec countries, such as Russia, are also on board with reducing production for the sake of stabilizing the market. However, it should be noted that, in the past, decisions that OPEC has come to have not stuck. In the following article by the Wall Street Journal, they discuss this in further detail:
Some OPEC members have a history of not sticking to agreements. The cuts may not be deep enough to offer a significant boost to the oil price, while any big gains will only encourage greater supply from non-OPEC members, in particular the U.S.
Click here to see the rest of this article.
What Does This Mean For You?
If this truly goes into effect, then it is inevitable that your home heating oil prices will rise. Experts claim that they do not suspect that it will go up to $100/barrel as it priced a couple of years back. However, it will rise which, in turn, means that you home heating expenses will go up. There are two things that you can. First, you can do whatever it takes to reduce these costs. Be sure to winterize your home.
- Replace worn weatherstripping
- Eliminate drafts around electrical outlets
- Cover windows and patio doors with clear plastic
- Be sure that you aren’t losing warm air through your chimney
- Insulate your attic
- Seal any leaks in your ductwork
- Tune up your heating system
- Install a programmable thermostat
- Open curtains when it is sunny out
- Lock doors and windows
By doing even a few of these items, you will reduce your heating expenses. Your home will feel more comfortable because you have taken the necessary steps to prevent the cold air from getting in. Additionally, you should consider buying discount heating oil.
Online Oil Ordering
Online oil ordering is a great way to reduce home heating costs because you are buying high quality oil at a reduced pricing. You will have to be aware of how much oil you have in your tank and place an order when it is getting low. Because there is no automatic delivery scheduled, the burden of responsibility falls on your shoulders to make sure that your tank doesn’t run dry.
Another difference in discount, online oil ordering vs automatic, full service delivery is the maintenance and care of your heating system equipment. When you handle the scheduling of oil delivers on your own, you also need to handle the scheduling of getting your system serviced. Typically, the service fees are higher than if you are on an automatic delivery schedule however the savings of the discount oil may offset the higher service fees.
Heating Oil Delivery Allentown PA
By following the above tips, you will be able to lower your home heating expenses even if OPEC is reducing crude oil production. It is important that you make your home as energy efficient as possible. Be sure to schedule a heating system tune-up if you haven’t already done so. As mentioned earlier, ordering online allows you to pay less for high quality heating oil. Between all three of these aspects, you will certainly see a difference on your energy costs. Be sure to hire a qualified HVAC company to do all maintenance on your heating system and deliver your heating oil.
Be sure to contact R.F. Ohl for all of your home heating needs. We offer reliable and affordable heating oil delivery services and heating system maintenance. Be sure to contact us to find out more on our fuel oil delivery options.
We service Allentown PA 18101, Bethlehem PA 18015, Catasauqua PA 18032, Center Valley PA 18034, Coplay PA 18037, East Texas PA 18046, Emmaus PA 18049, Lehigh Valley PA 18001, Limeport PA 18060, Northampton PA 18067, Whitehall PA 18052, and surrounding areas.