During the financial portion of national news broadcasts, there is usually some mention of the price of crude oil. That is because we use it for so many different things. We use it to fuel our cars, and to make the asphalt our cars drive on. Petroleum is used to make plastics and many modern pharmaceuticals. Many also use it to heat their homes, and when the price of crude oil gets too high, long winters can be miserable. Home heating oil prices have reached record highs. This high home heating oil cost has caused many to have to make a financial decision between heating their homes and feeding their families.
The average cost of heating oil has never been higher. There are a number of factors that go into producing these high home heating oil prices. First, of course, is the ever rising price of crude oil. Even the price of crude is affected by costs associated with discovering new sources of oil, extracting it from the ground, transporting the oil, and the refining process. After refining, there are product production costs, marketing costs, taxes, and profits for the refiners, wholesalers, and dealers.
Residential home heating oil is stored above or below ground in heating oil tanks. These tanks have an expected useful life of 15 to 30 years. The above ground tanks hold 250 to 275 gallons. On average, these tanks must be filled 3 to 4 times a year. The underground tanks are larger and hold 500 to 1000 gallons of oil. In the northeastern region of the United States, the 40% of homes that use oil to heat their homes use an average of 800 gallons a year. Most of this usage occurs between October and March.
Home heating oil prices are measured by the gallon. They fluctuate in the same way and for the same reasons as prices for gasoline. In November of 2011, residential heating oil prices reached $3.877 a gallon. At that price, the average home will spend over $3100 on home heating oil this year. This is the highest that home heating oil prices have ever been, and is over $1 more than November 2010. That means the average home will be spending an extra $800 a year on home heating oil. With median household incomes remaining stagnant in this struggling economy, that means families will have less disposable income to spend as they tighten their budgets even further to account for the rising costs of oil.
There is no relief in sight. After an impressive fall in prices from October 2008 to March 2009, prices have been steadily on the rise. The United States Energy Information Agency is projecting heating oil cost to remain flat well into 2012. The Agency is also projecting home heating oil expenditures to increase 10% in the winter of 2011 versus the winter of 2010.
The high cost of heating oil has widespread consequences for the local and national economies. Rising oil prices means people will have less money to spend, especially as the rise in prices outstrips any rise in household incomes. These higher prices come at a very important time of the year for retailers. The Christmas holiday shopping season sets the tone for how successful retail chains will be financially for the year. With less disposable income, spending during the holidays will diminish. Weak holiday sales have long term consequences for retailers.
Without holiday sales driving their top line for the year, cuts will have to follow if companies want to report positive financial results. These cuts usually occur in labor, meaning more jobs will be lost, and less raises will be given. Thus, the cycle of the struggling economy will continue.
One way to combat the rise in home heating oil prices is to take advantage of seasonal trends. Heating oil prices are at their lowest in the summer, as that is when demand is lower as well. To save on home heating oil cost, many homeowners will elect to fill their tanks in the middle of the summer so that they are starting out the winter season with lower cost oil.
Another way to protect you and your household from high home heating oil prices is by choosing the right heating oil company. When considering doing business with any oil company, make sure to check their customer service record with the Better Business Bureau. Also, compare the company’s oil prices with the oil industry average, and carefully read the service agreements. You will be spending as much on oil as you would if you were having your home renovated. So, get multiple estimates as you would when considering construction contractors.
If your tank is relatively new and requires little maintenance, then a discount fuel oil provider might be the choice for you. Discount providers only deliver oil, and they usually do this on a cash basis. They do not provide any additional services to your tank. Full service oil providers are different. Their service agreement actually includes provisions for maintaining your heating oil tank. They also offer automatic deliveries, 24-hour emergency service, and a 30 day credit. They can work with your budget with capped or fixed prices.
Heating oil delivery can be done on a credit, contract, or cash basis. Many people prefer to pay cash to cover home heating oil cost. Others would rather work out an agreement that allows them to spread out the money they pay for winter heating oil throughout the year so they can better absorb the cost into their household budgets.
Oil delivery company service agreements offer many benefits to their customers. They can spread out payments over twelve months based on the average price of oil for the previous year. Some also offer discounts to certain civic and community groups, as well as senior citizens and those living on fixed incomes. Oil delivery companies have to be licensed. Always remember to make sure your company’s license is current, because using an unlicensed company can void your homeowner’s insurance policy.