Why Will My Fuel Prices Be Higher This Year?

Whether you are a year-round resident or a seasonal homeowner, you may have noticed the rising prices of fuel over the past year. Local obstacles and international market changes have led to this increase. Find out what exactly affects heating oil and propane pricing on the Cape and how you can prepare for it.

What You Need to Know

Higher than average fuel costs on Cape Cod are caused by several long-term and recent factors. Here are the basics about why Cape fuel prices have been historically higher than rates in other locations in New England, and why Cape customers should anticipate increases this year.

Cape Cod can expect to see higher than average fuel prices because…

  • Delivering fuel to Cape Cod is more expensive, due to limited access and distance from major fuel terminals. In addition, the price of diesel used for transportation has increased dramatically.
  • Domestic exports of crude oil and propane from the U.S. are going up, causing the demand and price of heating oil to increase.
  • The price of propane is impacted by higher crude oil prices and the increased amount of exports.

Is switching to natural gas the answer to avoiding these circumstances?

No. New natural gas hookups have been frozen on the Mid and Lower Cape through 2019. 

The Details

Limited access and location

Cape Cod customers typically experience higher fuel prices than consumers in other parts of Massachusetts and the Northeast. This is caused by several local challenges. Cape Cod is located much further from major fuel terminals in the Northeast. The greater distance incurs more mileage and delivery expense for fuel distributors. Residents and seasonal visitors know that there is limited access to the Cape. Few driving entry points affect more than just beach traffic. This limited access paired with the greater distance to fuel terminals makes fuel delivery to the area more expensive overall.

Domestic crude oil exports

According to the EIA, U.S. crude oil and petroleum product gross exports have more than doubled over the past six years [1]. These numbers are only expected to grow. The EIA projects that U.S. crude oil production will average 10.7 million barrels per day (bpd) in 2018, up from the average 9.3 million bpd in 2017 [2]. This has not only increased the number of countries abroad that rely on the U.S. for their crude oil supply, but has also significantly reduced America’s dependence on foreign oil. In fact, most of the heating oil Cape Cod customers use is sourced right here in the United States.

Heating oil and propane prices

The price of crude oil determines the price of heating oil for consumers. Crude oil rates have increased over the years due to the tightening of global oil supplies, the higher demand for U.S. exports, and a decreased stock of distillate fuel due to refinery outages caused by Hurricane Harvey in 2017 [3]. These factors and the rampant increase in exports to other countries affect propane customers as well, because higher crude oil prices impact propane rates [4].

What about natural gas?

In 2014, National Grid placed a moratorium for new natural gas hookups on the Lower Cape. This will be in effect until 2019, which means switching to natural gas isn’t available to customers that currently use heating oil or propane in our area. Not to mention, if natural gas hookups were available, the switch would incur more cost and inconvenience than rising heating oil and propane prices. For many years, we have heard that natural gas was cheap and domestic; right now heating oil and propane are domestic as well. This means that natural gas prices are expected to rise at the same rate as other domestically produced crude oil and fuels, like heating oil and propane.

The Bottom Line

The cost of heating oil and propane for Cape Cod customers, and Cape Cod fuel providers, is at the mercy of circumstantial factors beyond our control. While the prediction of rising rates may seem like bad news, there is a brighter side:

  • Greater domestic production means more use of American-made fuel at home and abroad.
  • Heating oil and propane continue to be environmentally friendly heating options.
  • HVAC manufacturers continue to produce more efficient products, which will help customers save on annual fuel spending and service work.
  • Signing up for price protection can add predictability to your fuel payments and lock in a rate for the entire heating season.

 

  1. The U.S. Energy Information Administration
  2. oilprice.com
  3. The Commonwealth of Massachusetts
  4. The Commonwealth of Massachusetts