Prices of heating oil can vary from day to day, and can vary among suppliers, even in a single town or county. Over a long term, heating oil price changes can be substantial. There are several major factors which influence the price of heating oil.
Demand seasonality has the greatest impact on oil price changes. Demand for heating oil and other fuels consumers use for heating usually peaks in the beginning of the season, which is late September to mid-November. Oil prices generally remain high during winter, to fall slowly during February and March. During spring, price of oil tends to go down even more. Difference in prices of heating oil in May and October may vary by 20 percent or more.
Recently, this factor took a major role in determining oil heat prices. This is because there is a broad number of factors which affect it. Oil is traded internationally, which means its price is determined by changes in global supply and demand. As oil price is a result of stock trading, where crude oil is sold as future contracts for several months in advance (usually 3 or 6), traders monitor political and weather events throughout the world in an attempt to estimate future oil demand. For example, if a major armed conflict breaks out somewhere around the globe, the public and traders expect price increases. This specially goes if such a war happens to be in an oil exporting country, which affects both supply and demand on a global level. Even though over 80% of oil consumed in the US has domestic origin, it still needs to be sold at global prices.
Large areas with many heating oil consumers, such as Long Island, also have an abundance of suppliers. To compete with each other, they wage continuous price wars. Their prices are also influenced by the price they paid for every load of heating oil from refiners, short-term demand and changes in demand (majorly influenced by weather), and the amount of oil each supplier has in stock. If a supplier needs to empty its stock for the next load or for technical reasons (i.e. cleaning or other maintenance or repair) they will lower their prices substantially trying to sell the remaining oil as quickly as possible.
Expenses of running a heating oil delivery business vary depending on the location. Suppliers in different locations have to comply with different county and state regulations. Local taxation may also be different, as well as other operational costs. This all builds up their final price. Wholesale inventories also play a role, especially in the Northeast since there is a considerable amount of import oil which takes up to several weeks to be shipped, refined and deposed.
As there are no 100% accurate long-term weather forecasts, consumers can't make reliable heating oil order plans and schedules. Due to that, heating oil demand is still highly influenced by short-term weather events. If a wave of frostbite lasts for over a week, local demand will peak and local prices would most probably explode. However, a week later weather can improve significantly, and it may quickly return the price back to normal. It is clear that having a large oil tank would be good for your budget.