Cost of living pressures are piling up for many families throughout the UK, with further rises in water bills due in April, as well as an increase in the energy price cap which is due to be announced by OFGEM later this month, affecting anyone relying on mains gas and/or electricity. Adding to these pressures, a sharp rise in inflation has been announced this morning, with a bigger jump than analysts expected and further rises expected later this year.
Inflation rose by 3% in the twelve months to January, the highest it has been in 10 months, food prices and airfares becoming ever more expensive.
Off-grid homes have no access to mains gas and many rely on heating oil or LPG for their energy source, so in this blog, after a colder than average winter, we’re going to take a look at what’s happening with heating oil prices and what the future might hold for the 4.4 million households across Great Britain that are not connected to the mains gas grid.
What affects heating oil prices?
Heating oil prices are notoriously volatile – why? Well, because they are at the mercy of lots of different factors that are outside our control.
Supply and demand, the pound's strength against the US dollar, refinery prices and transportation and distribution costs, production levels set by OPEC+, and geopolitical events all influence the price we all pay for our domestic heating oil in the UK.
Reuters has reported that yesterday oil prices settled higher as supply disruptions mounted in Russia and the United States, and Ukrainian drones attacked a Russian pumping station on the Capsian Pipeline Consortium pipeline. Plus, a cold snap in the U.S. has hit oil supply, reducing production by up to 150,000 barrels a day – all global events that affect supply and demand and ultimately reflect in the price of oil.
What’s going on in the world of heating oil prices now?
After seeing escalating prices back in 2021 when Russia invaded Ukraine, the good news is that heating oil prices are relatively settled at this time, although they do change on a daily basis and have been on the move this week.
Since his inauguration, President Donald Trump has imposed various tariffs on imports from China, and made threats to impose tariffs on other countries which could weigh on oil prices by raising the costs of consumer goods. However, prices settled back with talks to end the war in Ukraine as this could result in a boost in supply from Moscow. According to the International Energy Agency (IEA) Oil Market Report, it is too early to tell how prices will respond to new US tariffs and the impact of sanctions on Iran and Russia, although in a report last week according to Worldoil.com, OPEC’s Vienna-based secretariat warned about the dangers posed by U.S. trade tariffs saying the measures ‘added more uncertainly into markets’, going on to say they would ‘generate more volatility’.
What does the future hold?
With so many uncertainties, the truth is no one really knows! Global factors are shaking up the market, which raises questions as to what the future holds for heating oil prices.
Short-term factors such as the prolonged cold spell we’ve experienced since the beginning of the year have impacted supply and demand, and the ongoing Trump administration agreement with Russia to hold diplomatic talks to end the Russia-Ukraine war could lead to a deal to ease or help remove sanctions that have disrupted the flow of Russian oil shipments. This in turn could lead to a reduction in oil prices as supply increases.
OPEC, and its partners in OPEC+, whose production levels significantly impact global oil prices, have been withholding a substantial amount of their oil production for nearly three years now, which equates to an amount close to 6 million barrels a day, and equal to 5.7% of global supply. When OPEC reduces production targets, crude oil prices tend to increase and in the same way, when production is increased, prices tend to fall back. There is currently some speculation that OPEC+ may decide to delay its planned series of monthly supply increases which are due to begin with a 120,000 barrels-a-day increase in April - this would represent the fourth time it has delayed plans to revive production since 2022.
Should I top-up now?
With so much uncertainty in the world, you may be wondering whether to top up now or wait. It can be difficult to decide when to buy as there’s no sure-fire way of knowing what will happen to heating oil prices in the future.
Whilst the basic principles of seasonal supply and demand often result in lower heating oil prices in the summer months, this isn’t always the case. So many other factors affect prices as we have already explored and as we saw when Russia invaded Ukraine. Prices can rocket upwards as a result of political unrest.
Buy wisely!
If you do decide to top up your heating oil tank, don’t leave it until the last minute as it pays to plan ahead. Some suppliers charge extra for an emergency delivery, and it is also worth buying more than the minimum 500 litre delivery (the minimum volume approved by Trading Standards for bulk meters) as often heating oil suppliers charge a higher unit price per litre for a smaller delivery.
It’s also worth considering upgrading to a premium oil. Specially formulated and proven to optimise the performance of your boiler, it contains an additive which makes your heating oil boiler up to 15% more efficient. It also reduces boiler breakdown and servicing problems, plus it's better for the environment too, being a cleaner burning fuel that has reduced CO2 emissions when compared to traditional heating oil, and as such it helps to reduce your carbon footprint.
If the prospect of a large heating oil bill is holding you back, many suppliers offer payment plans to ease the worry of big winter heating oil bills. With the Northern Energy Premium Package* you can choose how you pay, with one option being to spread the cost with interest-free monthly payments, and you would also receive an upgrade to our premium heating oil at no additional cost.
You can also take energy saving measures to help lower your heating bills. There are some simple and very affordable ways to reduce heat loss and keep the cold out such as using weather stripping tape to draught-proof your windows which is inexpensive and can be purchased from your local DIY. And don't forget to get your heating oil boiler serviced by an OFTEC registered engineer to keep it in tip-top condition, running at maximum efficiency and increasing its life span too.
If you'd like to know more, please call us on 01423 770 666 - we're always at the end of the phone and happy to help.
*T's and C's apply