With inflation, everything is looking up except the amount of money in your wallet. The cost of food, gas at the pump, goods, and services are all up noticeably. And although demand is lowering as the U.S. heating season ends, the cost of home heating oil is still on the rise.
A standard home heating oil tank is 275 gallons. In March 2021, the price of U.S. heating oil averaged $2.85 a gallon and it cost $790 to fill a standard tank. By March 28, 2022, it had climbed to $5.12 per gallon, or $1,410 to fill the same tank. That is $620 more than a year ago, according to numbers from the U.S. Energy Information Administration.
About half of that increase happened in the last six weeks and the cause is tied to the Russian-Ukrainian war, according to Sean Cota, president and CEO of the National Energy and Fuels Institute, a trade group for the wholesale and retail liquid heating fuel distributors industry.
Heating oil is a petroleum distillate made from crude oil. It is in the same category as diesel and jet fuel and the three typically relate to each other, Cota told The Epoch Times. The increase in the price of heating oil is connected to the world crude oil supply.
“This all is a direct result of the war in the Ukraine,” Cota said, explaining that it starts with basic supply and demand. “We had a dramatic cut off due to sanctions both of Russian products into Europe and the cutting off financial transactions to Russia for their engagement in the Ukraine. There is essentially, a 3-million barrel per day shortage of crude oil.”
In Europe, they use a lot of natural gas and a fuel called “gas oil,” which is largely produced in Russia. Through sanctions and financial restrictions, gas oil is essentially banned from the market.
President Joe Biden banned the import of Russian oil, liquefied natural gas, and coal to the United States.
Another change: oil tankers are taking different routes.
“Basically, the entire world distribution of energy since the war has completely changed,” Cota said. “Normal trade routes for energy, which were optimized based upon a world price of energy, had tankers going the shortest possible distance, and the disruption in the market has changed all of the logistics.”
All of this has created a shortage that is being filled in large part by U.S. production of sweet crudes for the European refineries and refined products from the United States, in addition to natural gas, which has gone up as well, Cota said. It’s being exported in larger amounts to Europe from the United States.
“The U.S. is the largest producer of oil in the world right now, which 15-years ago, before fracking, nobody would have believed. But the products that we produce from fracking wells is what’s called a light sweet crude which U.S. refineries actually don’t use very much, so most of that is exported,” Cota said. “Then we import heavier crudes which we can refine cleaner than the rest of the world because of our environmental regulations. And so, we are one of the biggest net exporters of crude oil and importers of a different flavored oil.”
Everybody in the United States who can increase production of crude oil is ramping it up, he says, but it doesn’t happen overnight.
“We'll probably increase our production about a million to 2 million barrels per day in the next 18 months. Elsewhere in the world they’re going to be increasing production as well and certain parts of the world, not as affluent as the U.S. on a per capita basis, are going to be much more affected.”
“Even though the prices are high and are affecting the average American fairly significantly, it’s not as dramatic as say somebody in India,” Cota said, saying that in some countries people are not just cutting back on using energy, they are deciding not to use it at all. “If it costs you more to go to work than what you get paid at work, you stop going to work.”
Cota says Republicans are supportive of drilling and Democrats are supportive of wind and electric, and to thrive, all energy forms are needed. But too often, regulations are barriers to modernizing energy.
“For national security and for the U.S. economy, we need all of the energy types, and we need to facilitate it as much as we can. That will not only make America more secure, that will make the world more secure, and that starts with policies, local, state, and federal. You can’t make building a stadium easier building infrastructure that’s going to support the economy in the long run.”
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