As the US heads into winter, home heating oil prices remain near record highs. Colder-than-expected winter weather, a global oil supply shortage and ongoing pandemic supply chain issues are putting shocking energy bills for US homeowners.
If you’re suffering from higher energy bills, consider our range of guides to saving energy at home, including heat pumps vs solar panels, ovens vs air fryers, electric heaters vs vs oil heaters, dishwashers vs handwashing and our energy bill saving audit .
Heating oil prices for private households: weekly development
The current national average for heating oil prices is $5.147/gallon as of Nov. 28, according to the US Energy Information Administration. After hitting an all-time high in early November 2022, the price has fallen but remains historically high. Here is the weekly trajectory since October 2022:
Subscribe to Kiplinger’s Personal Finance
Be a smarter, better informed investor.
Save up to 74%
Sign up for Kiplinger’s free e-newsletters
Swipe to scroll horizontally Date US Heating Oil Price Avg. (USD/Gallon)11/28/22$5.14711/21/22$5.43111/14/22$5.78311/07/22$5.90210/31/22$5.83610/24/22$5.699Heated Oil Prices: Why So high?
According to Statista, home heating oil prices have more than doubled from a 2000s low of $2.06 in the winter of 2015/2016. A year ago, at the end of November 2021, the average national price was $3.36 according to YCharts. Prices are now above $5, a mark they never broke until March 2022, shortly after Russia invaded Ukraine and sparked a global energy crisis.
The increasing cold increases the demand every winter and thus the prices for heating oil, which cover the period from October to March. According to the Energy Information Administration, a homeowner in the Northeast uses 850 to 1,200 gallons of heating oil in a typical winter and very little the rest of the year.
Crude oil accounts for 58% of the price of heating oil, and the war in Ukraine and associated energy sanctions against Russia had generally pushed up oil prices around the world. Additional energy demand from China as it slowly emerges from Covid-19 lockdowns is putting further upward pressure on oil prices. Problems in the US supply chain with the availability of tankers and trucks can drive up associated oil transportation costs.
Some US states rely more heavily on heating oil than others, affecting regional prices. The North Atlantic region, from Maryland to Maine, relies more on heating oil than natural gas to heat homes, making the region more exposed to global oil price fluctuations.
Many of these northeastern states rely on decades-old heating oil tanks and infrastructure. According to Quartz, three-fifths of Maine homes use oil as their primary source of energy for heating, a greater proportion than in any other state. This dynamic is one reason why residential energy costs in the Northeast are 15.4% higher than in the rest of the US, where energy prices have actually started to fall.
Heating oil prices: What’s next?
The Energy Information Administration (EIA) expects residential heating oil prices to remain above $5.00/gallon for the remainder of 2022. She also expects that these higher heating oil prices and higher consumption due to a colder-than-average winter will increase heating bills for affected homeowners by 45% compared to last winter.
The Biden administration is considering tapping its reserve of 1 million barrels of heating oil as winter approaches and uncertainty about market prices mounts, according to NBC News. The White House is also considering ways to build additional reserves of heating oil, which the government could release if supply tightens or prices rise again.
The EIA expects a slightly shrinking US economy to lower heating oil prices in the first half of 2023.
Until then, with increased energy bills affecting every corner of the United States, homeowners should definitely consider an energy audit to make significant savings on their monthly bills.