EIA predicts Oilheat Homes to Pay Less for Heat
November 4, 2014
During the Winter Energy Outlook Conference in Washington D.C., industry representatives and energy experts came together to see what would affect the energy markets this year domestically and abroad. In this meeting, these members predicted a decline in heat costs for several reasons:
Domestically, there are pipeline and infrastructure developments throughout the U.S. driving down the price of domestic oil, as well as affecting shale oil internationally. Geopolitical pricing premiums for crude oil have shrunk because of liquidating positions, as well as a decrease in the amount of oil traded on ICE Brent, decreasing 75% from its peak last year. All of these reasons have been driving down oil prices.
The GDP growth in 2015 seems to be slowing. An August revision cuts the 2014 outlook by 10 basis points to 2.8%, and 2015 global growth is predicted to move from 3.4% to 3.5%. Europe and Japan especially are expected to expand quantitative easing programs, with growth more than likely struggling in major economies in the coming year. Additionally, the Middle East, South Asia, and former Soviet Union are building new refineries which put additional pressure on the refinery margins.
Weather Forecasts and Consumption:
The Conference predicts a decrease in consumption this year, as well as a decrease in retail price. They estimate heating oil will drop 15%, or $362 on average, less than last year. If the temperature raises another 10% over last winter, expect prices to drop closer to 24%.
Environmental and Efficiency Improvements:
There has been a push to make things more economical and efficient in the Northeastern states by moving to a low-sulfur heating oil product. This will, in turn, make a switch to long-term improvements to heating equipment. By increasing the blends of heating oil and renewable biodiesel, greenhouse gas emission reduces and there is an increase in long-term solutions to renewable fuel for American customers.