Why aren't oil prices regulated
They used to be, but this led to inflated prices and artificial
shortages. Now, while prices can fluctuate sharply under a free
market, they have generally stayed much lower and supplies have not
been a problem.
How are oil prices set
Heating fuels like oil, natural gas, propane and electricity are
traded on the commodities market which goes up and down like the
stock market. By far, the biggest influence on the cost of heating
oil is the price of its raw material, crude oil.
What can cause rapid price changes
The market responds immediately to any situation that might affect
supply or demand, including unexpected cold or warm weather, supply
interruptions or excess production. These changes are immediately
reflected in the wholesale price your dealer pays for the oil he
delivers to you.
Do local dealers make more profit during sudden price changes
No. When world oil prices rise, it doesn't mean they get a bigger
share of it. It's similar to when orange juice prices go up because
of an early frost. The local grocery doesn't make the extra money.
So who does make the money
Anyone (including major oil companies, refiners, speculators and
others) who was either smart or lucky enough to have secured oil
before the prices started to rise. However, these same people would
have lost money had prices dropped.
Do local dealers wait to deliver until prices are highest
It's tempting to think that, especially if you've just gotten a
high-priced delivery. But remember, your local dealer has no way to
tell what will happen to wholesale prices from week to week. Until
they can find a better crystal ball, dealers base their deliveries on
customer needs and the most efficient truck routes.
How can companies in the same area charge very different prices
Heating oil is a very competitive business. At any time, you may find
people who are priced either higher or lower than your dealer. The
difference depends upon:
a. The quality of the fuel and certainty of supply.
b. The quality of service they provide.
c. The payment terms, delivery options and equipment repair service
they offer .
After wholesale prices drop, when do retail prices follow
It depends on how much oil your local dealer bought or stored at a
higher price, and how quickly he sells it due to cold weather. It
also depends on how much of the original wholesale increase he
absorbed to cushion his customers when prices went up.
When you separate the facts from the fiction, you can feel very good
about your choice of heating fuel and your oil dealer.
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