Why Oil And Fuel Prices Are The Lowest They’ve Been In Years
I couldn't believe it. Yesterday we ran out of pellets and my wife wasn't afraid to turn the thermostat up to 70 degrees. Before the pellet stove and kids, we kept the house at a balmy 59 degrees. Sometimes it was colder in the house than outside. But with heating oil upwards of $4 or more per gallon, we had to keep it conservative.
So how did we go from $4 a gallon to just over $2? In a nutshell, here is an overview of the rise and all of a sudden fall of the price of crude oil.
Over the last decade plus, the demand for oil continued to rise. Globally, there were more people driving, more homes being built that needed heating, etc. As demand surged, production couldn't keep up and so to did the cost begin to climb.
Countries like the US and Canada began investing and discovering new ways to source energy, including crude oil. You've heard of "fracking" perhaps? The US has been able to add to it's crude oil reserves by fracking. That started in 2008. So why has it taken until 2014 for prices to start falling? Although the US has added about 4 million barrels of oil per day, the conflicts in key oil production regions, like Libya, has caused 3 million barrels per day to be removed from the market.
Since July, turmoil in Libya began to ease, allowing for more oil production, making more available, helping drive down prices. But, the effect of high prices has left consumers (like myself) consuming less, being more conservative and finding alternative ways to heat homes.
OPEC, the world's largest producers/suppliers of oil, were expected to cut back production to drive up prices. They have not done so thinking that allowing prices to fall will cause an increase in consumption (I.E. my wife turning the heat up to 70 degrees).
There you have it. Turn up the heat while it's still affordable and stay warm this winter.