For homes heated by mains gas and electricity in the UK, the energy price cap, which is now reviewed each quarter, protects consumers from paying excessive fees for their energy. It limits the amounts that suppliers can charge per unit of energy used, and sets a maximum rate for daily standing charges.
The great news is that, as from 1st April this year, the energy price cap will reduce once again – to a 2-year low. So something to look forward to!
According to OFGEM, Great Britain’s independent energy regulator, the price a typical on-grid household that pays by direct debit and uses electricity and mains gas will pay will reduce to £1,690 per annum. This is £238 lower than the price cap set between 1st January to 31st March 2024. Of course, this is only an average - if you use more fuel than the average householder, you'll pay more.
The unit price for mains gas is falling by 19%, but this is little comfort for those living off-grid who don’t have access to mains gas, but instead have to look to alternative heat sources such as domestic heating oil. Whilst households that rely on oil fired central heating will benefit from the fall of 14% in the unit price of electricity, they are instead subject to fluctuating heating oil prices.
In this blog, we’re going to help you understand why home heating oil prices are so volatile, look at whether Spring is a good time to buy your heating oil and what’s happening with prices, and also look at what you can do to reduce your heating oil costs and usage.
Oil volatility - we look at why
Oil is one of the world’s most volatile commodities, and subject to many different forces. So why is heating oil so volatile?
Well, factors such as geopolitical tensions, changes in production quotas, natural disasters and shifts in global supply and demand all influence prices. Production increases tend to decrease prices, and on the other hand, a decrease in production tends to drive prices up. Increased transportation costs and even speculation by traders can also impact prices.
At present, there is rising concern within oil markets over the potential tightening of global supply due to escalating conflict in the Middle East, as well as intensifying tensions between Russia and Ukraine. Attacks on energy facilities in Russia and Ukraine are causing concern over global supply. In addition, the tensions in the Red Sea continue, with key shipping routes affected and the longer shipping routes adding to costs.
So what’s happening to prices now?
Despite the Red Sea crisis, we have not seen the sharp jump in oil prices that we saw when Russia invaded Ukraine just over two years ago. At that time, oil prices skyrocketed due to the threat of shortages, as countries sought alternative sources due to the sanctions that were put in place on Russian imports.
The volumes currently being produced are, in effect, staying the same despite the troubles in the Red Sea area, all-but there is a delay within the supply chain as tankers now have to reroute around the Cape of Good Hope in South Africa. As supply Is a major influencer on heating oil prices, this is good news for the pockets of the nearly 870,000 households that are reliant on oil for their central heating across England and Wales.
Time your top-up
Higher oil prices have an impact on all of us that use heating oil. Choosing when to buy can be a difficult decision as the jury’s out as to what will happen to prices in the future – so much depends on the unknown.
However, as demand decreases with warmer weather and we all reach to turn down the thermostat and use our heating less, often heating oil prices fall. Typically, the cheapest months to buy are the summer ones when demand is at its lowest, although it’s always difficult to predict what will happen.
As the trees blossom and the birds nest as we head further into Spring, and we all enjoy the lighter nights and warmer weather, it can be a great time to top up your oil tank and potentially make savings on higher winter prices, as demand drops off.
But this can’t be taken for granted and you shouldn’t rely on seasonality alone. There are other top tips you can do to stay warm without turning the heating on. However, a sudden cold snap can see a rise in demand, and often that goes hand-in-hand with a spike in the price. Then there’s the potential for increased delivery timescales.
Other factors such as changes in exchange rates (oil is traded in U.S. dollars so the value of the pound against the dollar can have a bearing), OPEC, and even local competition play a part as well. So, we would advise you to keep an eye on prices, and also when it’s the right time for you to buy, consider buying in bulk rather than drip-feeding your tank with small orders. Domestic heating oil suppliers will often charge a higher unit price for smaller deliveries of say 500 litres.
A further benefit of having a full oil tank in the summer is it will help you avoid the build-up of condensation which can more likely occur if your tank level is low. Condensation is more common in spring and summer time. When the weather starts to warm up, the internal temperature of your tank will be cooler than the outside temperature, and as the moist air cools, it can cause water droplets to form and settle at the bottom of your tank. This, over time, will build up and then the water in your tank could cause tank corrosion and damage to your central heating boiler.
Go Premium
Whilst, frustratingly, we have no control over world oil prices, there are things you can do to reduce your heating oil costs and usage.
Premium heating oil, for instance, will give you better economy than regular kerosene with up to 15% improved boiler efficiency, and whilst it usually costs a bit more, it saves you money in the short and long term. And not just in terms of the amount of fuel you use, but also as a cleaner alternative, it’s better for your appliances too. With little or no deposit build-up, it will reduce the risk of boiler breakdowns and maintenance issues.
So it doesn’t just save you money, it’s good for your boiler and the environment too! And if you’re a Northern Energy Flexi Saver customer, you’ll receive our Premium Heating Oil at no extra cost, making your money go further.
Be a boiler spoiler
Spring is a great time to spoil your boiler and treat it to a bit of pampering.
As you’ll need to turn it off for a short spell so your engineer can do a service, what better time than when you’re not dependent on it in the way you would be in the depths of winter?
Having your boiler serviced regularly will keep it running at its best – which means it’ll be at its most efficient, reducing fuel consumption - so your heating oil lasts longer. And it’ll be less likely to break down as your engineer will be able to spot and deal with any potential issues before they spiral into an expensive repair bill.
Always use an OFTEC registered oil heating engineer so you can be sure of a trustworthy and reliable technician who’ll keep your boiler healthy, ensure you’re kept safe from the potential risk of carbon monoxide, and most likely extend the lifespan of your boiler too.
So significant savings all round!
Spring clean
Whilst its a good time of year to spring clean your home, it's also a perfect time to think about insulation and other ways to reduce heat loss. It's a great way to keep your home warmer in the winter months and keep heating bills down. Insulating really can make a considerable difference and even little fixes can significantly reduce heat loss and lower your bills. Draught-proofing, for instance, is one of the cheapest and most effective ways to save money, and according to The Energy Savings Trust can save you around £45 a year.
Despite the oil market being a notoriously volatile one, It’s not all doom and gloom. For one, it means you get to live in the countryside away from the hustle and bustle, with all the benefits of rural living, such as breathing clean air.
Home heating oil remains highly efficient, burning hotter than gas or electricity, so your home will warm up quickly. It’s a reliable, and affordable way to heat your home, and is incredibly safe. It comes with the ability to buy in bulk and stock up when prices are low.
If you’re thinking about filling your tank and you’d like a heating oil quote, contact us on 01423 770 666 or alternatively visit our website to get an instant oil quote.