2015 Oil Price Review and Predictions
Oil prices reached an 11 year low this year, seeing the price per barrel of WTI (West Texas Immediate) Crude Oil dropping to $34.73 on December 18th. In 2015 this price fall has been reflected by the price of home heating oil with our price on December 22nd reaching 26.99p per litre! In this post I’ll explain why these prices have dropped so much, the reason fuel prices don’t vary as much as heating oil prices and my predictions for 2016.
Why has the price dropped so much?
Simply put the price of crude oil depends on supply & demand.
Over the last year the supply has increased dramatically. OPEC, an association of 13 oil-exporting countries, didn’t agree a target and therefore those within the association produced a lot more oil than they otherwise could. Shale Oil production in the U.S has boomed whilst their 40 year oil export ban has ended, and Iran has also had sanctions lifted this year. This all contributed to an increase in the supply.
This increase in supply meant that in order for prices to remain high, the demand needed to increase too. However there was actually a reduction in demand, mainly through China’s economic instability throughout the summer of 2015, and China has also been attempting to change its economy to be less dependent on manufacturing, which will further lower the demand. This combination of a higher supply and lower demand has ultimately caused the lower oil price.
Why don’t fuel prices vary as much as my home heating oil?
You might notice that your central heating oil prices have lowered a lot over the past year whilst the price you pay for petrol or diesel price hasn’t changed as drastically. Research carried out by Wood Mackenzie in 2014 showed that the cost price of fuel is only 33% of the pump price, so changes in oil price only directly affect that 33%. Some of the other costs involved in providing petrol and diesel, such as the overheads of staff and properties, aren’t present within the heating oil industry, since we don’t require a network of fuel stations and huge amounts of staff, and so we can transfer more of the price reduction to our customers than suppliers of petrol and diesel. The fact that the prices change so much within the heating oil market means you should really compare prices when buying, and the easiest way to do that is with our fuel price comparison graph.
What are my predictions for 2016?
The heating oil market is very hard, if not impossible, to predict, as there are many factors that can make the price rise and fall. This past year has been a very good year for consumers, and I see this continuing for 2016, with prices remaining consistently low.
Looking back across the past 10 years the heating oil price has been extremely volatile, but there are long-term trends, and if you compare the last 10 years to now, it would indicate that the price will bounce between 24.00 pence per litre and 35.00 pence per litre over a 12 month period, but that’s still pretty low.
The best advice I can give is to keep your eye on our price graph!
To all of HomeFuels Direct customers I wish you all the best for 2016.