U.S. residential heating oil prices decline from record-highs in November

At the start of the winter heating season (October–March), the retail price of home heating oil in the United States climbed rapidly, establishing a new record in early November, according to data from our State Heating Oil and Propane Program (SHOPP). Since then, the price has decreased because of declining prices for crude oil, warmer-than-normal weather, and unseasonal distillate inventory growth.

The national average price for home heating oil was $4.73 per gallon (gal) on October 3, 2022, the beginning of the winter heating season. By November 7, the national average price had climbed to a record $5.93/gal, the highest price reported since we began collecting this data in October 1990, after adjusting for inflation. Low distillate fuel inventories in the United States and tight supplies in the Atlantic Basin both contributed to the rapid price increase. Since then, the price of home heating oil has fallen $1.47/gal (25%) to $4.47/gal as of February 6, 2023.

After the record-high prices in November, warmer-than-normal weather reduced heating demand. According to the latest weekly data from the National Oceanic and Atmospheric Administration (NOAA), the United States has experienced 8% fewer heating degree days (measured from July 1, 2022, through February 4, 2023) than normal. The latest monthly total degree-day forecast from NOAA indicates that it expects warmer-than-normal weather to continue in February and March.

Brent crude oil prices fell from $100 per barrel (b) on November 7, 2022, to $75/b on January 4, 2023, which lowered heating oil prices. Although crude oil prices have climbed since then, reaching $80/b on February 6, prices remain lower than earlier in the winter heating season.

In 2022, distillate inventories (which include home heating oil and diesel fuel) in the Northeast declined less than usual from the beginning of September through October. The Northeast region has the highest percentage of households that use home heating oil as the primary space heating fuel. Distillate inventories in the Northeast fell 1.8 million barrels from September 2 to October 28, slightly less than half of the previous five-year (2017–21) average decrease of 3.9 million barrels.

Over the first three months of the winter heating season, distillate inventories in the Northeast increased by 5.7 million barrels, compared with the previous five-year average increase of 0.9 million barrels, putting downward pressure on heating oil prices. Following a cold weather front that moved across the nation in December 2022, distillate inventories in the Northeast declined in the beginning of 2023, falling from 21.3 million barrels on January 6 to 20.0 million barrels on January 13. As of February 3, distillate inventories in the Northeast totaled 21.1 million barrels.

Inflation adjusted home heating oil prices in the Northeast averaged $5.98/gal on November 7 but fell to $4.48/gal as of February 6, according to our SHOPP data.

Principal contributor: Matthew French