The price of oil has been dropping precipitously this fall, both in the United States and around the world. While analysts had previously predicted that oil would be about 6 percent cheaper than last year, prices are falling faster than anyone expected and could drop 15 percent or more. The plunge is due to both increased production in the United States and geopolitical maneuvering by other oil producing countries — but the bottom line is more money in your pocket if you use oil as your primary winter fuel source.
How Much Can I Save?
If you already purchased your oil for the winter, you’re out of luck for taking advantage of current savings, but if prices stay low you can lock in a big discount for next year when you fill up your tank next spring or summer. Exactly how much money you can save depends on your location, among other things.
The price of heating oil will vary by state due to taxes and other factors. In Massachusetts, for example, heating oil has fallen from an average of $3.91 a gallon last year to $3.20 this year. In Pennsylvania, it’s down to $2.99 per gallon, from $3.68 a year ago. The average home that used oil spent $2,354 on fuel last winter, according to the U.S. Energy Information Administration, although specific amounts differ widely by region. Regardless of where you live, this year should be a lot cheaper.
That’s not to say it’s time to rip out your natural gas furnace and replace it with an oil heater. Most homeowners will still pay significantly less for gas than they would with oil, and future prices are unpredictable — there’s no way to say that oil won’t rebound and cost a small fortune again sometime in the next few years.
Why Is Oil so Cheap?
The United States and Canada have been increasing their oil production for years, which accounts for part of this year’s plummeting prices. The other side of the equation is Saudi Arabia and other member nations of the Organization of the Petroleum Exporting Countries(OPEC). Under normal circumstances, OPEC lowers oil production as prices drop, in order to curtail the supply and keep the dollar value from falling too far. However, this year oil-producing countries have kept the pumps going full blast. While they are opaque about their motivations, analysts suspect that OPEC is willing to see a hit to short-term profits and allow prices to continue to drop in order to push drillers in North America out of the market, where it’s more expensive to operate. The long-term implications of the strategy are yet to be determined, but in the meantime consumers who use oil heat can enjoy the cheapest prices they’ve seen in years.
Of course, you can save money every year by taking measures to winterize your house and make it more energy efficient, no matter what type of fuel you use.