Factors Contributing to Energy Prices
There are many factors that cause energy prices to rise (and fall), especially the basic market fundamentals of global supply and demand. When lower supply gets matched to higher demand, it’s inevitable that prices will go up.
But there are also “wild cards” like severe weather and other unexpected events that affect energy production, like hurricanes knocking refineries offline or unrest in oil-producing countries. Wall Street speculators also play a role in what they are willing to invest in—or not.
When Crude Oil Fell to -$30
In the Spring of 2020, at the beginning of the pandemic, crude oil prices fell all the way to negative $30 per barrel—the first time something like this happened. Traders had to pay buyers to take oil!
The Spring of 2020 is also when another wild card—COVID-19—got into the game. Demand for oil sunk to deep depths with more and more countries going into lockdown. Global supply became diminished as a result. Now, with the wide availability of vaccines in most countries, people are traveling again and businesses have opened up. But global supply hasn’t caught up with all of this increased demand.
These factors and more resulted in crude oil prices climbing above $80 per barrel, a level we haven’t seen in seven years.
Gasoline and heating oil, both of which are refined from crude oil, have both risen more than a dollar more per gallon vs. a year ago. But it doesn’t stop there. Natural gas prices have skyrocketed more than 150%. And higher natural gas prices spark price hikes for wholesale electricity because of our heavy reliance on natural gas-fired power plants.
Besides rising energy prices, we’re also seeing painful price increases in many other products. A big problem has been—once again— the COVID-19 pandemic— which has caused enormous supply-chain challenges. This is limiting supply even as the demand for goods keeps rising.
New Jersey Heating Oil Companies Want to Help
People sometimes misunderstand how negatively higher prices impact local fuel dealers. Heating oil companies don’t make more money when prices rise like this—they actually make less.
Think of it this way: it’s like when the cost of coffee, milk or orange juice rises. It’s not the local grocery store that is profiting. (That’s left to the Wall Street investors). Heating oil customers have a harder time paying their bills. They reduce expenditures. Heating oil companies may need to tap into their lines of credit more. Phones light up with questions from customers. So the sooner energy prices drop, the happier your heating oil company will be.
In the meantime, please reach out your heating oil supplier to find out ways they may be able to help you reduce your energy costs, or handle payments more easily. And if you are worried about keeping up with your heating oil costs, please pick up the phone and call them. They can generally work with you if you reach out before you fall behind.
Rest assured, your heating oil supplier will do everything possible to ensure they can make deliveries—no matter the cost or difficulty they face.
Your New Jersey heating oil company appreciates your understanding during this difficult time.