It seems like we just can't win on heating-oil prices. The U.S. Energy Department estimates that we're going to pay 10 percent more for heating oil this winter than we did last year, even though temperatures for the season are forecast to be 2 percent higher.
And here's something that isn't going to help: U.S. inventories of diesel fuel and heating oil have dropped to a three-year low, just at a time when we're going to need them the most!
There are a couple of reasons why prices are rising and supplies are dropping:
- Crude oil inventories are tighter because the political unrest in Libya has cut the country's exports to near zero.
- Competition for diesel fuel, which is essentially heating oil but with a lower sulfur level, is growing as the world's automobile fleet expands. Diesel fuel is a factor in the U.S. for trucking, but it's the primary automobile fuel in most of the rest of the world.
In fact, the U.S. now is a major exporter of diesel and heating oil, also known as distillate fuel. U.S. exports topped 600,000 barrels a day last year, up from 100,000 barrels a day in 2003, according to the
Now this isn't to say there's a shortage of heating oil. There isn't. We'll have enough for our tanks this winter. But according to the Energy Department, supplies are definitely at the lower end of "normal," and scarcity breeds higher prices.
Higher prices nationally don't signal that your suppliers are gouging us. This is just the free market at work. Trying to control the price of petroleum, or any other commodity, doesn't work. The government attempted that in the 1970s and it created a nightmare of regulations that prevented investment and stifled compeition. The reality is that heating oil, or any petroleum product, must compete in a global market now. Unless the European economy collapses with the unfolding debt crisis, the likelihood is that prices will continue to climb.