Will surging gas prices affect heating oil prices?
As a heating oil user, you may be wondering if the gas crisis affects you and if having an oil-fired heating system means you are immune from the effects of the gas crisis?
We understand the concern and we’re here to inform you on whether the gas crisis will affect heating oil households, and provide some simple ways to reduce your heating oil bills.
What is the gas crisis?
Britain gets around a third of its total; energy from burning gas, and in the last year gas prices have risen 450%. This has led to energy companies selling gas to their customers lower than the cost they are buying it for. This huge rise is due to the combined effects of a number of different factors which have all occurred at once.
1. Energy demand is rising
This is partly as the world comes out of lockdown, but also due to the change in season which is expected ahead of the 2021-22 winter period.
2. Shortage of gas storage
The shortage is due to record low supplies related to political and weather factors.
Taken together, energy analysts say that if the UK experiences anything other than a mild winter, gas will be in very short supply. As a result, investors are entering the market and the price of gas is soaring.
However, if we have mild winter weather, and gas supplies increase again (a new pipeline between Russia and Europe has just been completed) prices could still reduce before Christmas.
Will heating oil prices be affected by the gas crisis?
Heating oil is more dependent on the wholesale price of crude oil rather than the price of natural gas. The gas crisis has not directly impacted heating oil prices, but due to other factors the cost of oil has risen.
Compared to gas prices, heating oil has not risen as steeply over the last year.
What’s caused heating oil prices to rise?
There has been a spike in demand in heating oil prices in the short term, this has been due panic buying.
However, there are long term the factors that have impacted heating oil prices which are:
1. An increase in global demand
2. A shortage of HGV drivers
3. Brent crude oil rising to over $80 a barrel
These changes have resulted in a *118% increase in the UK average ppl for heating oil within the last year and 104% increase in Northern Ireland.
What will happen with heating oil prices this winter?
If the UK experiences a particularly cold winter, then heating oil consumption and demand could rise over a short period of time. This would inevitably leading to a further price increase for heating oil households. In the worst-case scenario, demand may outstrip refinery production levels and if that happens, heating oil users could find themselves in a similar situation to that currently faced by gas consumers. However, the early indications are that Europe is not expecting a particularly severe winter and there are no signs of restricted refinery capacity.
Is this a long term trend?
We don’t have a crystal ball, but we do use our insight of the market to provide you with some thoughts on long term trends.
There are no expectations of fuel shortages for heating oil.
Even though there has been fuel shortages seen across the U.K, this has largely been caused by panic buying. This situation isn’t expected to happen in heating oil sector. While supplies may be tight this winter, they are likely to be sufficient to meet demand even if prices rise. However, if the increase in demand and shortage of HGV drivers continue, this may lengthen delivery times for heating oil orders.
Increase in the interest of renewable energy
With many homes set to see increased energy bills, we may see an increased amount of interest in renewable energy and hybrid systems. Decarbonising both the gas network and those properties which are off the gas grid has proved difficult. Nevertheless, energy industries predict a decline in fossil fuel energy, primarily due to the government’s net-zero target.
These complex factors with gas and heating oil highlight the need to move to renewable energy sources where possible. Different solutions will suit different locations, but it’s clear that a move to renewable energy can help shield households from unexpected price rises.
BoilerJuice advice for heating oil households
If you’re in need of a top-up soon, there are a number of things that you can do to reduce the price you pay for your heating oil.
Be smart about when you place your order
Delivery times are currently longer and prices have significantly higher due to demand. If you don’t need a top-up any time soon we advise to wait, and keep an eye on prices as this may save you more. However, make sure you don’t run too low on heating oil and give yourself plenty of time for your delivery.
Reduce your heating oil usage
Check out our top tips on reducing your heating oil usage and carbon emissions. These tips will help your heating oil last longer.
Written By Richard Crowhurst
Richard Crowhurst has 15 years of experience in freelance writing and 8 years of being an author specialising in commercial horticulture, agriculture and energy.