Why Does the Price of Oil Fluctuate?

If you use oil to heat your home, then you’ll be no stranger to the way the price fluctuates month-by-month, year-by-year. In some ways it can b good, as sometimes you can take advantage of a sudden price drop, but then you always have the worry of a steep rise. If you know what’s causing the ups and downs, you can sometimes predict the changes and schedule your orders accordingly.

Changes in the price of crude oil

This is one of the major factors affecting the cost of your orders from Super Saver Oil! Crude oil prices are determined by the levels of supply and demand across the world and this varies with weather patterns as well as geopolitical and economic events. The amount of oil coming from the OPEC (Organisation of the Petroleum Exporting Countries) members has a big impact on crude prices across the globe.

Seasonal variations

As you can imagine, the time of year affects demand and regardless of the crude oil prices, heating oil will become more expensive in autumn and winter and cheaper in the spring and summer. On average, a household uses 1,000 litres of heating oil over winter, but not much at all between May and October.

Local competition

If there are quite a few oil suppliers in an area, then they need to set competitive prices to stay ahead of their rivals. Conversely, where there’s only a few sellers, prices will nudge up as there’s much less competition.

Transportation costs

The cost of delivery is often factored into the overall charge, so if you live somewhere quite remote, then the supplier has to factor in the time and fuel spent getting to you. This can affect the cost per litre, so it’s wise to try to club together with neighbours when you order your oil in.

Why are there sudden surges?

Prices can fall dramatically and then suddenly spike up again, often with hardly any warning. Prices tend to stay low and stable when there’s not much going on in the world – no sudden temperature drops, no economic crises, no political events to get to grips with. When there’s plenty of oil in stock, from the refineries to the wholesalers and the global scene is quiet, the cost per litre is nice and low. However, if there’s a cold snap in Europe, or a row in the Middle East that threatens supply lines, you’ll see the rates go right up.

Unsurprisingly, cold weather has people using up their domestic supplies faster than they normally would and also sometimes faster than their supplier can get in and deliver new oil. The refineries sometimes have to work extra hard to service the demand, so wholesalers bump up their prices to reflect this.

If things are especially tight, wholesalers sometimes have to rely on reinforcements being shipped in from the Gulf or elsewhere in Europe and this can take a few weeks. These can be tense times for both suppliers and customers, so costs will go up, sometimes quite a bit. Thankfully, once everyone’s filled up again, everything relaxes.