Heating oil prices paid by consumers can vary over time and by where a consumer lives. Prices can change for a variety of reasons. These include:
Seasonality in the demand for heating oil - When crude oil prices are stable, home heating oil prices tend to gradually rise in the winter months when demand is highest. However, at times, prices can surge quickly to very high levels, as occurred in January/February 2000 (see box on "What Causes a Surge in Heating Oil Prices"). A homeowner in the Northeast might use 650-1000 gallons of heating oil during a typical winter, while consuming very little during the rest of the year.
Changes in the cost of crude oil - Since crude oil is a major price component of heating oil, changes in the price of crude oil will generally affect the price of heating oil. (See Figure 2.) Crude oil prices are determined by worldwide supply and demand. Demand can vary worldwide with the economy and with weather. The Organization of Petroleum Exporting Countries (OPEC) and other factors can influence supply.
Competition in local markets - Competitive differences can be substantial between a locality with only one or a few suppliers or dealers versus an area with a large number of competitors. Consumers in remote or rural locations may face higher prices because there are fewer competitors.
