About 8.5 million American households rely on heating oil to keep warm in the winter, but many people are unfamiliar with the components of heating oil prices. The information below will help you better understand the factors behind the costs and provide tips that could help you lower your own heating oil bill.
Heating Oil Cost and Supplies
Crude oil prices are the biggest factor affecting heating oil prices.
Crude oil is the single largest component of heating oil, which means that when crude oil costs are higher, heating oil prices are likely to be higher, and vice versa. To provide some perspective, in 2007, the cost of crude oil accounted for 62 percent of the cost of a gallon of heating oil, compared with 22 percent for distribution and marketing costs and 16 percent for refinery processing costs.
Because crude oil is also the raw material for other important fuels such as gasoline, diesel and jet fuel, refineries must make predictions about how much of each to produce and when based on a combination of supply and demand calculations. Additional information about crude oil prices and weekly updates are available on the U.S. Energy Information Administration’s (EIA) website.
Increased Demand for Diesel
Increased diesel demand can affect heating oil supplies.
Heating oil and diesel fuel are closely related products. Both are distillates and are generally made together during the refining process—only the last steps are different. When demand for on-highway diesel increases, refiners often generate a greater proportion of diesel than heating oil from the distillate stream, and vice versa when heating oil demand increases.
Until recently, global highway diesel demand was very strong, causing much of the distillate yield to go toward diesel. Worldwide diesel demand is propelled mainly by economic growth, particularly in developing nations, as well as a push in Europe to increase the usage of diesel vehicles. More than half of European cars are fueled by diesel.
Reducing Your Heating Bill
There are many no-or low-cost methods that can help you save on heating oil.
Simply reducing the thermostat by 10 to 15 degrees for eight hours a day, while you are out of the house or asleep, will help you save about 10 percent a year on your heating bill. A programmable thermostat can make it easy to set back your temperature.
Because your water heater can account for 14 to 25 percent of the energy consumed in your home, consider turning down the temperature of your water heater to the warm setting of 120 degrees.
Also consider having an energy audit of your home to determine if there are ways you can easily reduce your home-heating consumption. Other ideas include:
- Covering drafty windows with heavy-duty clear plastic film
- Installing tight-fitting, insulated drapes or shades
- Taking advantage of the heat from the sun by opening curtains on south-facing windows during the day
- Finding and sealing air leaks
- Stopping cold air from coming down the flue of your fireplace by keeping the damper closed unless a fire is going
- Replacing appliances and heating and cooling equipment with more energy efficient (Energy Star) models
- Scheduling regular maintenance of your heating/cooling system, including replacing your furnace filter regularly
- Insulating your water tank to hold the heat inside
Financial aid may be available to help you pay your heating bills.
Finding the money to pay heating bills can be difficult for some consumers, particularly lower income Americans. Energy assistance, including help with utility bills or programs to reduce energy usage by improving the energy efficiency of a home, is available for lower-income households through federal programs administered by state offices, and also through private programs.
Both home owners and renters are eligible for these programs, which can be found on the Department of Energy’s website. The federal Low Income Home Energy Assistance Program also gives money to states to help qualifying families pay their heating bills.
Your heating oil dealer may offer purchasing plans to help keep your bills down.
Arrange to have your tank filled in late summer or early fall, when heating oil prices are generally lower. You may also be able to participate in a budget plan to stabilize your monthly bill. Finally, determine whether you are eligible for a "cap" or fixed price protection program, which can help you control the cost.
Northeast Heating Oil Reserve
Maximum inventory of the reserve is 2 million barrels.
The Department of Energy maintains that a 2-million-barrel reserve is enough to provide relief from weather-related shortages for approximately ten days, or the amount of time it takes for ships to bring heating oil from the Gulf of Mexico to the New York Harbor. More information about the Northeast Heating Oil Reserve is available on the EIA website.