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Domestic Heating Oil Prices at an 8 Year Low – But Why?

In case you haven’t noticed Heating Oil prices have been falling dramatically. The UK average for home heating oil was 48.56 pence per litre (inc VAT) this time last year, it’s now at a staggering 8 year low of 31.92 pence per litre today. So why is this happening? How long will it last?

Factors that Influence Heating Oil Prices

Factors that influence heating oil prices
Factors that influence heating oil prices

There’s always a number of factors effecting the price of oil in the UK; VAT rates, weather conditions, demand, distribution costs, refining costs, currency exchange rates, and even conflicts in oil-producing countries all need to be taken into account.

This time though, the main factor contributing to this drop seems to be the price of crude oil.

Crude Oil is Cheap!

World oil supply chart 2013-2015
World oil supply chart 2013-2015 Source: International Energy Agency

If you read the business section of your favourite paper you’ll already be well aware, but Crude Oil is cheap at the moment, and this can’t be overstated, with the price per barrel falling from above $100 a barrel in 2014 to $40 a barrel in 2015. To put this into perspective the price hasn’t dropped lower than $70 per barrel since 2010.

With the US production of oil it’s highest in almost 30 years, and Opec refusing to cut production, the market is flooded, bringing crude oil prices down, and allowing domestic oil users to benefit.

Should I Stock Up Now?

So how long will this last? Will they drop even further?

Well the answers would be we don’t know, and maybe.

Not very helpful we agree, but at the moment we’re not sure anybody knows. All countries are starting to feel the pinch though; this means production could slow down and prices could rise at any moment – so now may be the perfect moment to take advantage…[/vc_cta][/vc_column][/vc_row]

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