Home Heating Oil Price Trends

It's always good news to hear when heating oil prices are down. We know for a fact that more than a hundred million people rely on it in order to heat their homes and keep them warm. But the unfortunate fact is that heating oil prices seem to be going up in one instance and down again in another. So what's with the latest price trends these days? Why are the prices fluctuating?

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Heating Oil Price: A Historical Perspective

Heating oil comes from crude oil, just like other products like gasoline. The oil prices from the middle of the 80s up to early 200 were quite stable. During that span of time, the average price was $20 per barrel. But just like other commodities, products, or even service charges, it was expected to increase as years passed. As a matter of fact, this economic trend didn't spare heating oil as the average price per barrel went up to more than $130 when the recession started. And for the past three years, it's been above $80.

For homeowners who rely on oil, the thought of purchasing oil for $80 may be disappointing especially if they recall paying $20 for the same product more than a decade ago. But for us, it's actually something to be happy about. Remember that about five years ago, the price went up so high that many people were starting to contemplate on switching to propane, natural gas, or electricity. But today, the recent heating oil price trends are becoming a bit more favorable to those who elected to stick with their oil-fired furnace.

The Reliance to Oil

We may be looking at different price forecasts for heating oil, but there's one fact no one can deny: oil is and will always be the lifeblood of the economy. The U.S. economy is so dependent to it that every single aspect of life in this country needs oil. Therefore, unless there's a major technological discovery or breakthrough for another energy source, oil will always be the dominant fuel in this lifetime. And with this fact, seeing high oil prices will correspond to bad news for oil-dependent nations who import oil. Low oil prices on the other hand mean a bit more breathing room.

So if you're looking at a price of oil at $90 per barrel, the first impression would be that it's too high. But do remember that heating oil comes from crude oil, and crude is never cheap these days. From the early 1900s up to 2001, the average price was $25 per barrel. But there have been a lot of developments lately that contribute to oil prices soaring high.

One very popular misconception about heating oil price trends today is that it's all about the law of supply and demand. If that was the case, then we would be looking at $40 per barrel instead of $90. Not a lot of people realize that the main reason why oil prices are unstable and sometimes very high is geopolitical risk. This means that because of the ever increasing problems and unrest in the Middle East especially in oil producing countries of Syria, Libya, and Egypt, there is an existing geopolitical risk premium on the price of oil. While we don't really feel the violence in American soil, we are definitely feeling the effect of it. Because of this risk, we're paying an additional $10 minimum per barrel for the oil we're using to heat our homes. It's a sad fact that we may have to face as we hope to be comfortable and warm every winter for every year.

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