If you’ve been watching fuel prices lately, you’ve probably noticed that they can change quickly—sometimes even from one day to the next.
Whether you’re filling your car with gasoline, ordering heating oil or having propane delivered to your home, changing energy prices can leave you wondering: Why does the price of fuel fluctuate so much, and who determines what I pay?
The answer is more complicated than you might think. The price you pay for heating fuel is influenced by a much larger energy market, with factors ranging from global supply and demand to weather, inventories and transportation.
Understanding how that system works can help explain why prices sometimes change so quickly.
Heating Oil Prices Start with the Global Oil Market
Heating oil is a petroleum product made from crude oil, so the cost of crude is one of the major factors affecting the price of heating oil.
Crude oil is traded in a global marketplace. Its price can move based on worldwide supply and demand, geopolitical events, production decisions, economic conditions, weather and concerns about potential disruptions to the world’s oil supply.
That means an event thousands of miles away can eventually affect the wholesale cost of heating oil here in New England.
But crude oil is only part of the equation.
Before heating oil reaches your home, crude oil must be refined into usable products. The finished fuel then has to be transported, stored and distributed before being delivered by truck to individual homes and businesses.
Each step is part of the final cost of a gallon of heating oil.
Why Can Heating Oil Prices Change So Quickly?
Energy markets don’t stand still.
A change in crude-oil prices, refinery capacity, inventories or available supply can affect wholesale heating-oil prices. Seasonal demand matters, too.
Here in New England, heating-oil demand increases significantly during the colder months. If extremely cold weather causes demand to rise quickly at the same time inventories are tightening, the market can respond with higher prices.
Transportation and supply disruptions can also affect regional prices. Because the Northeast relies on fuel moving through a network of refineries, terminals, pipelines, ships, barges, rail and trucks, disruptions anywhere along that chain can influence the cost and availability of supply.
What About Propane?
Propane prices are influenced by some of the same forces, but the propane market works somewhat differently from heating oil.
Propane is produced through both natural-gas processing and crude-oil refining. Its price can therefore be influenced by conditions in both energy markets.
Supply and demand are particularly important.
Propane production is relatively consistent throughout the year, while residential demand is highly seasonal. Inventories are typically built during warmer months and drawn down as demand increases during fall and winter. For homeowners, knowing how much propane is left in your tank can be especially important during periods of increased winter demand.
A prolonged stretch of very cold weather can increase propane consumption quickly. If demand rises faster than available supplies can respond, wholesale prices can increase.
Transportation matters as well. New England is relatively far from many of the country’s major propane supply sources, so the cost and availability of moving propane into the region can affect what local suppliers pay.
From the Energy Market to Your Home
Although we often talk about “the price of heating oil” or “the price of propane,” there isn’t one person or company setting a single price.
Think of it more like a chain:
Global and domestic energy markets → wholesale fuel costs → transportation and storage → local fuel supplier → delivery to your home
When costs earlier in that chain change, those changes eventually work their way through the market.
That’s also why different fuel companies may adjust their prices around the same time. Local dealers are purchasing product within the same broader wholesale marketplace.
Why Does the Price Sometimes Change From One Day to the Next?
Wholesale energy markets can move daily.
Sometimes the movement is relatively small. During periods of uncertainty or significant market disruption, prices can move much more rapidly.
Fuel suppliers must purchase new product continually throughout the heating season. As the wholesale cost of replacement fuel changes, retail prices can change as well.
This is one reason the price you hear today may not necessarily be the same price available days or weeks later.
What Can Proulx Control?
At Proulx Oil & Propane, we can’t control the global energy markets, geopolitical events, the weather or the wholesale price of fuel.
What we can control is how we take care of our customers.
That means maintaining dependable fuel supply, making reliable deliveries, offering Automatic Delivery to help customers avoid running out of fuel, providing 24-hour emergency service and having a local team available when our customers need us. Safety is also an important part of being a propane homeowner, including knowing what propane smells like and what to do if you smell it.
We’ve been serving families and businesses throughout New Hampshire, Southern Maine and northeastern Massachusetts since 1944. During that time, energy markets have changed many times.
Our responsibility remains the same: to monitor those markets carefully, plan for the heating season and provide the dependable local service our customers count on.
Frequently Asked Questions About Heating Oil and Propane Prices
Why does the price of heating oil change?
Heating oil prices are influenced by the cost of crude oil, refining, supply and demand, inventories, transportation and seasonal weather conditions. Because many of these factors can change quickly, wholesale and retail heating oil prices can change quickly as well.
Does the price of crude oil affect heating oil prices?
Yes. Heating oil is produced from crude oil, so crude-oil prices are an important component of heating-oil prices. However, refining, transportation, inventories and regional supply and demand also affect the price consumers ultimately pay.
Does crude oil affect propane prices too?
It can, but propane pricing works differently. Propane is produced from both natural-gas processing and crude-oil refining. Propane prices can be affected by supply and demand, inventories, weather, transportation and conditions in both the natural-gas and crude-oil markets.
Why can fuel prices change from one day to the next?
Wholesale energy markets change continually. Fuel suppliers regularly purchase replacement product, so changes in wholesale costs can eventually affect retail prices.
Why are heating fuel prices sometimes different from one company to another?
Fuel companies may purchase product at different times and from different suppliers, and their transportation, storage, delivery and operating costs can vary. However, local fuel dealers are generally operating within the same broader wholesale energy market.
Have Questions About Heating Oil or Propane?
Fuel markets can be complicated, and prices can change quickly. If you have questions about your heating oil or propane service, contact the Proulx Oil & Propane team. If you’re comparing propane providers, you may also have questions about what happens to your propane tank when you switch companies.
We’re always happy to help you understand your account, your fuel service and the options currently available to you.
