Home heating oil bills are rising
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Home heating oil bills are likely to be massive this winter in the Northeast — and as one such homeowner, I am terrified.
Why it matters: Beyond my ability to keep my daughter and dog alive through the long, dark suburban winter, the looming shadow of the oil delivery truck underscores the costs consumers are bearing as a result of parallel wars in Iran and Ukraine.
- U.S. gasoline prices averaged $4.15 for a gallon of regular on Tuesday, according to AAA.
- Diesel hit an all-time high price of $5.90 a gallon on Monday and stayed there on Tuesday.
Catch up quick: Like prices for diesel — a close cousin of home heating oil among refined petroleum products — heating fuel prices are hovering near record highs.
- In part this is related to the Iran war, where the closure of the Strait of Hormuz not only disrupted shipments of crude oil, but also curtailed exports of refined products out of the volatile region.
- It also reflects Ukrainian drone strikes on refineries in Russia — long an important global exporter of petroleum products like diesel. The attacks prompted Russia to ban exports, leaving its customers scrambling for global supplies.
The latest: In recent days, benchmark U.S. home heating oil futures leapfrogged highs hit in late 2022.
- U.S. heating oil futures are up just shy of 30% over the last three months.
- And they're up about 120% since the start of the year.
Between the lines: Refineries are the big winners in this situation. Their profit margins have surged as a result of a global shortage of refining capacity.
- American refiners have also added to the bottom line by exporting refined distillates — the category of petroleum products that includes diesel and heating oil — to capitalize on prices in foreign markets that are even higher than those in the U.S.
- Weekly exports of distillates hit a record high of 1.9 million barrels per day in early August, although they've since declined slightly.
The big picture: Soaring heating oil costs will largely be borne by homeowners in the Northeast, where reliance on heating oil is concentrated.
- Roughly 3% of U.S. households — over 4 million — use the stuff, which tends to be the most expensive way to heat your home, according to the Energy Information Administration.
- EIA forecasts heating fuel prices this year will average $4.80 a gallon, about 33% higher than last year. But prices can vary widely.
Case in point: I just called my oil company in the New York suburbs to see what they were currently charging. It's bad — $6.86 a gallon.
Stunning stat: I have not hedged, dear reader.
- This may come as a surprise to loyal readers of Axios Markets, but I failed to take advantage of standard pricing programs that would have let me lock in lower costs earlier in the year. (Hey, I was busy!)
- This has left me unhedged — or as it's sometimes described in the market, naked — in my exposure to spot prices for fuel.
What they're saying: "Families are getting hit by both gasoline and heating oil," says Mark Wolfe, executive director for the National Energy Assistance Directors Association, which advocates for federal funding of programs that help low-income families pay their heating and cooling bills.
- "So, if you're in the Northeast, then this is much more burdensome than anywhere else in the country."
What we're watching: Whether the price of fuel oil emerges as an issue in the midterm elections.
- "This is usually something that doesn't make a big difference," said Kevin Book, head of research at energy consulting firm ClearView Energy Partners. "But in cold weather states — particularly those that rely on fuels other than natural gas, it could be a very big deal."
- Book highlighted Alaska (where 28% of households rely on fuel oil) and Maine (50%) as such states. Both are a focus for Democratic efforts to retake the U.S. Senate.
