Written on: March 14, 2022
While dealing with higher propane and heating oil prices can be frustrating and downright painful at times, try to take comfort in the fact that propane and heating oil both represent highly efficient and safe ways to heat your home and water—while reducing carbon emissions at the same time.
Plus, historical trends have shown us that when it comes to prices, what goes up must come down. It’s just a matter of when. For all of us, the feeling is, the sooner the better.
When war, political strife, conflict, or natural disasters like tsunamis, earthquakes or hurricanes occur in other regions of the world, this can impact crude oil and natural gas prices. Since propane is a by-product of both crude oil and natural gas, rising prices for these fuels have a ripple effect on propane.
Before the start of the war in Ukraine in late February, energy prices have been rising in anticipation of the potential sanctions that could be levied on the Russian energy sector if the country went ahead and invaded Ukraine.
Russia carries clout because it is the third-largest petroleum and liquid fuels producer in the world, behind only the United States and Saudi Arabia. It’s a major exporter of both crude oil and natural gas.
Even the hint of a possible disruption in energy supply will heavily influence the buying and selling done by commodities traders. In the frenzied world of investment, this is known as the fear factor.
When Russia eventually invaded Ukraine, and the U.S. placed a ban on Russian imported oil and petroleum products–with other countries expected to follow–that meant there would be a big energy void to fill. Those who make their living in the oil markets don’t like that uncertainty. This includes the speculators who are betting on price moves as well as the hedgers, who are limiting risk for their clients who are involved with either the production or consumption of oil.
Long-time factors that have always influenced where prices go include the balance between supply and demand. Weather extremes also play a role. If a reduction in supply occurs during a time of high demand, such as the colder months, a scarcer market develops. When a cold snap is especially extreme or lasts longer than usual, this scarcity gets further compounded. People may start to panic buy similar to what we saw at the start of the pandemic with the toilet paper shortage.
More recently, these issues have also come into play:
We don’t know where things will go from here, but if history is a guide, we can expect to see prices drop pretty significantly in the not-too-distant future. If you would like to read the U.S. Department of Energy’s short-term energy outlook, please go here.
Nothing will make your local Maine heating oil or propane company happier than when prices return to normal. Until then, trust your heating fuel supplier to look out for you and let’s hope that—regardless of what happens with energy prices—we will soon be living in a more peaceful world.