The price of heating oil is significantly influenced by the cost of crude oil, states U.S. Energy Information Administration. If crude oil prices do not increase rapidly, heating oil retail prices hold fairly steady.
There is a variety of reasons why the price of heating oil can change dramatically, notes U.S. Energy Information Administration. These reasons include regional operating costs, competition in local markets, seasonality in the demand for heating oil and changes in the price of crude oil.
During the winter, homeowners use a lot of heating oil, hence increasing its demand, reports U.S. Energy Information Administration. If the price of crude oil is stable during this period, then the price of heating oil significantly increases.
The number of heating oil suppliers in a particular region affects the level of competition in that area, too, according to U.S. Energy Information Administration. Where there are few suppliers, the prices of heating oil usually skyrocket because competitive differences are substantial in locations with fewer suppliers as opposed to areas with a large number of competitors.
The price of heating oil is also affected by the cost of delivering it to far-flung areas, states U.S. Energy Information Administration. Delivering the heating oil to remote locations takes a lot of time. During that time, storage inventories are drained, and the consumers' anxiety about short-term supply rises, thus prompting the sharp increase in the price of heating oil until new supply arrives.