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Title: Fluctuations And Surges In The Heating Oil Market
Author: John Bogdanski
Article:
Understanding factors that drive the volatility in residential
heating oil prices.
Fluctuations: Variations that occur in the price of petroleum
distillate products due to incremental, somewhat predictable,
changes in the supply and demand of such products.
*More consumers begin using heating oil as a secondary heating
source:
Some consumers may use heating oil to augment their existing
heat source in times of extreme cold. Prices of other heating
fuels (such as natural gas or kerosene) may increase even more
than heating oil during these periods.
*Wholesale buyers and anxious consumers drive the market up:
Resupply may be weeks away. Concerned that supplies will not
cover short-term customer demand, wholesale buyers bid up prices
for available product. All the while the regional inventory is
being depleted. Consumers become anxious about their short-term
needs and continue buying up the current inventory; driving
prices up sharply until the new supply arrives.
*Seasonal demand for heating oil:
Where the consumer lives also plays a significant part in the
seasonal demand for heating oil. A homeowner in the Northeast
might use 650-1000 gallons of heating oil during a typical
winter, while their counterpart in South Carolina may use half
as much
There is an appreciable amount of oil-heated homes located in
New England and the Central Atlantic States. Approximately 6.3
million homes of the 8.1 million households nationwide that heat
with oil are located in the northeastern part of the United
States. That comprises roughly 78 percent of the total U.S.
heating oil market. The seasonal increase in inventories and
demand is largely confined to the Northeast. It is not uncommon
for the total receipts for heating oil sales in the Northeast to
exceed 80 percent of gross sales in any given year.
*Regional operating costs:
Prices in remote locations are also impacted by higher
transportation costs. Operating costs of dealers can vary
substantially with location as well. State and local fees and
regulations vary widely from one locale to another.
Surges: Drastic upshift in prices over a very short period of
time caused largely by unplanned events. Some of the conditions
that initiate a surge in prices are listed below.
*Refineries cannot meet unexpected demands:
Refineries do not just produce heating oil. It is but one of the
byproducts of their manufacturing process. It is not
economically feasible for them to produce excessive amounts of
surplus gasoline, diesel, and other distillate products to
produce heating oil for a short-term demand.
*Unexpected rapid drop in temperatures:
A rapid drop in the temperature in a region can have a severe
effect on supply and demand. Customers are using more fuel oil
unexpectedly and inventories are being depleted faster than they
can be replenished. Rivers and harbors may be frozen or other
disruptions to the supply chain may occur.
*Competition in local markets:
Areas with a limited number of suppliers may also net higher
prices. This is typically true in rural or remote areas where
the competitive advantage of choosing between numerous providers
is denied.
*Changes in the cost of crude oil:
As the principal cost component of all fossil fuels (at 42
percent of total cost), changes in the price of heating oil fuel
are closely linked to the price refineries pay for crude oil.
Price increases are complex and intermingled with one another.
Global supply and demand as well as the state of the global
economy and even the weather determine crude oil prices. The
Organization of Petroleum Exporting Countries (OPEC) and other
factors also influence supply and prices as well.
STAY WARM!
About the author:
Visit <a
href="http://www.homeheatingoilprices.com/Heating_Articles.php">H
ome Heating Oil Prices</a> Do your research,save yourself some
money. John Bogdanski renegade <a
href="http://www.oilheatmarketing.com/html/oil-heat-marketing.htm
l">Oil Heat marketing</a> executive tells all.
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