More and more, people who declined to convert their heating systems from oil to natural gas are looking pretty smart. Consider this:
- The combination of a huge surge in oil produced in the United States, weak global demand and a strong dollar have made heating oil prices plunge to their lowest level since 2009.
- During the winter of 2013–14, natural gas prices spiked because pipelines could not distribute enough fuel. At one point, the spot price of natural gas was actually higher than the equivalent retail price of heating oil.
- During the winter of 2014–15, natural gas spot prices rose at the very time oil prices were falling.
Supply concerns plague natural gas
Limitations on the way that natural gas is distributed continue to create supply challenges—and price concerns. Heading into the winter of 2014–15, natural gas prices had reached their most expensive point in more than a decade because of concerns that pipelines might not be able to distribute enough fuel.*
Other factors raising concerns about the direction of natural gas prices include:
- Power plants are converting from coal to gas faster than expected, causing a significant rise in demand.
- High demand for gas overseas. U.S. suppliers have been rushing to export our gas to markets in Europe and Asia, where they can charge more money. A decrease in domestic supply usually results in higher prices.
This all just goes to show that these days, oil heat customers like you have a lot less to worry about—and many more reasons to smile.
*Bloomberg News, 10/6/14