We've now waved goodbye to 2023 which, according to the Met Office, was provisionally the second warmest year on record for the UK, with a provisional mean temperature of 9.97 degrees C. And as we leap forward into 2024, you might well expect that the lower temperatures will lead to less demand for heating oil and, subsequently, lower prices.
But with so many factors other than just the weather affecting heating oil prices, such as geopolitical turmoil, global supply and demand, and concerns about the output of major producers such as Russia, it’s a very volatile market out there. In this blog, we’re going to take a look back over the last 12 months, see what has happened in the heating oil world, look at what it all means for those of us who use domestic heating oil, and what effect it's all having on heating oil prices at the beginning of 2024.
New Year – renewable fuel
2023 kicked off with Future Ready Fuels, launched by UKIFDA, the trade association for the liquid fuels distribution industry, urging oil users to write to their MP’s to persuade the government to support HVO use in heating and ensure it’s available at an affordable price. January saw George Eustice MP introduce a Ten Minute Rule Bill in Parliament which sought to reduce the duty charged on renewable liquid heating fuels such as HVO, a low-carbon alternative to traditional heating oil which doesn’t carry the high costs associated with installing a heat pump.
George Eustace’s support followed on from a successful trial in the Cornish village of Kehelland, where over the course of 18 months, local homes and the village church and school took part in a pioneering new project where their existing kerosene heating oil boilers were converted to use HVO (Hydrotreated Vegetable Oil).
HVO, as well as being a low carbon alternative to heating oil, reduces carbon emissions by almost 90% compared to traditional domestic heating oil. Existing oil fired central heating boilers can be conveniently converted at a low cost and will run on HVO as efficiently as traditional oil, with the added advantage of it being odourless.
OFTEC and UKIFDA CEO’s Paul Rose and Ken Cronin said that the project showed ‘there is an alternative way forward for millions of off-grid residents who can neither afford nor want to install a heat pump’.
In response to George Eustice’s amendment to the Energy Bill to ensure households have the choice of converting their oil-fired central heating boilers to run on renewable fuels, the government committed to delivering a consultation on the use of renewable liquid fuels within 12 months of the Bill receiving Royal Ascent.
Spring brings welcome relief
After the heady heating oil prices we saw as a result of the Russian invasion of Ukraine in February 2022, prices eased back in the early months of 2023, a welcome relief for many. This was due to a number of factors including an increase in global oil production and easing of geopolitical tensions.
Rising temperatures – rising oil prices
It’s not always the case, but often the cheapest months to buy your home heating oil can be June, July and August. But in 2023, as summer temperatures rose, so did oil prices.
Saudi Arabia, one of the largest oil suppliers within the OPEC+ group, announced a cut in crude oil production of 1 million barrels a day (bpd) which would take effect in July 2023. With supply and demand being a major factor in the price of oil, this announcement and the subsequent cut in production created uncertainty in the markets and led to prices rising.
Net Zero change in policy
September 2023 saw a change in the government's Net Zero policy which was welcome news for the 865,000* plus households across England and Wales that rely on heating oil as their only source of central heating.
*Figures from the Office for National Statistics 2021
The change in plans includes moving the date for off-grid fossil fuel boiler phase-out from 2026 to 2035, with this being an 80% phase-out, rather than the 100% initially planned. Furthermore, the government has said it will never force anyone to rip out their existing oil boiler and install a heat pump.
A rosy Autumn for Rosebank Oil Field
With autumn came the news that the US Government granted consent to Rosebank, Britain's largest untapped oil field which is 80 miles west of Shetland, approving new oil and gas licenses. This sparked some controversy and was said by some to contradict the government’s green pledges and its commitment to combatting climate change.
Prime Minister, Rishi Sunak, defended the decision, and said ‘Scotland’s North Sea industry is a really important part of its economy and it provides energy security for the UK.’
Sunak went on to say that he didn’t want the UK to be dependent on foreign imports for it’s energy, but wanted more gas from home rather than that imported from abroad. Rosebank is estimated to contain up to 300 million barrels of oil, and the oil and gas produced from the site will be sold at world market prices, according to majority owner, Equinor. Drilling is expected to start in 2026 and Rosebank could account for 8% of the UK’s total oil production between 2026 and 2030.
Whilst the Rosebank oil field’s production will not immediately impact energy costs for UK-based domestic heating oil users, producing 69,000 barrels of oil a day and 44 million cubic feet of gas, it has been claimed that it may help to boost energy security by providing a domestic source of fossil fuel in the UK.
What happened in December?
In the last month of 2023, several major shipping firms stopped all commercial shipments of oil and gas through the Red Sea.
A drone attack on two cargo shipping vessels, launched by the Houthis rebels in Yemen, sparked this in their protest over Israel’s war against Hammas in Gazza. Analysts warned that the situation in the Red Sea could increase oil prices but the good news was that the impact was minimal, although there was an initial ripple with a rise of just under 2% in the barrel dollar price.
So what’s happening to oil prices as we move forward in 2024?
Reuters, one of the world’s largest international news agencies founded nearly 170 years ago, reported last week that analysts are questioning whether OPEC+, the Organization of the Petroleum Exporting Countries and allies, would be able to sustain supply cuts to support the market. In a survey of 34 economists and analysts, only one expected prices to average higher this year than in 2023 – which is good news for the many households throughout the United Kingdom that use heating oil .
Of course, there are never any guarantees when it comes to domestic heating oil prices, and knowing when it’s a good time to buy your home heating oil is a tricky one. Our regularly updated blog contains some useful information to help you decide whether to fill your tank now – or wait!
And we’re always here to provide you with a quote – just call us on 01423 770 666 or go online.