Tensions have certainly escalated in the Middle East over recent weeks, and in the early hours of last Friday morning, Israel launched a retaliatory strike against Iran. The central province of Isfahan in Iran was hit with a missile strike after Iran launched a drone and missile strike on Israel the previous weekend.
Political unrest can have a significant impact on oil prices due to fears of supply disruption, and uncertainty and fear amongst oil traders and investors. As the region is a major producer of oil, with Iran producing about 4% of the world’s oil according to the US Energy Information Administration (EIA), any conflict involving the country can cause concerns about the stability of oil supplies and lead to speculation in the global oil market.
The BBC has reported this morning that UK petrol and diesel prices have risen, with petrol reaching an average of 150.1 pence a litre, the highest since November. So in this blog, we’re going to take a look at how this latest unrest has impacted heating oil prices in the UK over recent days and what may lie ahead for the summer.
Heating oil price rises - a temporary hit
Crude oil is traded in US dollars so the exchange rate between the US$ and the UK pound is a factor in determining heating oil prices in the UK. This goes back to the 1970’s when an agreement was reached between the United States and Saudi Arabia, with other oil-producing countries following suit. As the most widely used currency in international trade and finance, the US dollar is accepted and trusted by governments, banks and businesses worldwide.
Following Israel’s retaliatory strike last week, along with other commodities such as gold, oil prices spiked due to a fear that oil supply would be disrupted. Brent crude, which is a key benchmark for oil prices internationally, briefly traded at above 90 dollars a barrel. But the good news for the 870,000, households across England and Wales that rely on heating oil is that, following a volatile week, oil prices have now settled back to $88 a barrel.
Looking ahead to this summer
Predicting what’s going to happen with heating oil prices is always tricky, but with the current conflict in the Middle East and the war between Russia and Ukraine, it’s even more difficult than in more settled times.
Several big shipping firms have stopped all commercial shipments of oil and gas through the Red Sea, as it has become an increasingly dangerous route due to recent attacks. This highly escalated security situation has resulted in them rerouting around the Cape of Good Hope at the tip of South Africa, a much longer route which means increases in transportation costs and potentially could put upward pressure on the prices we all pay for our fuel.
It leaves many of us wondering whether now’s a good time to buy heating oil and whether, with the potential for further political conflict, prices are likely to rise or even peak this summer.
Whilst global oil prices have remained stable over the past week, with the ongoing unrest in the Middle East, the potential for further escalations, and market unpredictability, means quite simply, that there really is no easy answer.
There’s no doubt that these world events have an impact on prices, and whilst it’s often been thought in the past to be a better bet to top up your heating oil tank in the summer months, this year could well prove to be an exception to the rule.
Reasons to buy in the good ole British Summertime
Apart from the price of fuel, there are other things to consider when choosing when to buy your home heating oil. Although it might not be at the forefront of your mind when the sun is shining, there are some good reasons for topping up your heating oil tank in the summer months.
Whilst there are no guarantees that purchasing your heating oil in summer when demand is low will mean lower prices and potential savings, by planning ahead of the colder weather, delivery delays due to extreme weather when icy roads can hamper deliveries in the depth of winter, or when delivery schedules are extended due to spikes in demand, can be avoided. When a really cold snap hits, everyone orders. Your boiler has to work harder and the level in your tank will drop much quicker, and this is when you can reap the benefits of having a regular supplier that will prioritise your deliveries. And with increased demand frequently comes increases in price, so it’s always good to avoid any mad rushes and order in plenty of time.
Oil price spikes can have an adverse impact on the macroeconomy, and can push up inflation with increased transport costs and higher costs for businesses. Ultimately there’s nothing we, as individuals, can do to influence global oil prices. But whatever happens with heating oil prices this summer, there are other things you can do to keep your heating costs down.
Ordering ahead is likely to cost you less – suppliers will often charge more if you need your heating oil in a hurry. Express and emergency deliveries will usually attract a premium price. However, ordering a small volume will often mean you pay more as some suppliers charge a higher unit price for smaller deliveries. So it’s worth waiting if your tank is already relatively full. Having said that, it’s always a good idea to place your order well before your heating oil tank is empty, ideally before it gets below a quarter full. Think ‘ order at a quarter’, and prevent sludge build-up and water contamination.
Having your boiler serviced to keep it running at its maximum efficiency is another great tip and summer is a good time to do this when you're not reliant on your heating so can switch the boiler off and let it cool down ready for its service – read our 5 top tips for keeping your heating oil boiler in tip-top condition.
Using Premium Heating Oil, which is standard kerosene with an additive, is another good tip. It's more economical than regular domestic heating oil and kinder to your boiler. And of course, the summertime is a great time for doing some DIY and insulating your home to reduce heat loss, ready for the winter ahead.
Don’t forget, we’re always here if you want help and advise about the best time to buy your fuel, or you can pop online and get a quick quote at any time – or call us on 01423 770 666.