Home Heating Oil and Stock Market Prices

Display chart for the :

Stock Market and Home Heating Oil price trends
Since March 8, 2009,
the price differences between a litre of kerosene on the stock market
and a litre of kerosene delivered to your home are
Average: 8p.
Recently: 7p. (01/12/2009)
Smallest: 5p. (02/06/2009)
Biggest: 10p. (09/07/2009)

Working from pence per litre can be deceptive. For example, if you ordered 1 litre of oil, an oil distributor is not going to deliver it and put it in your tank for a few pence. They have to cover their costs.

Expect the pence per litre difference between home delivery and the stock market to be greater as the cost of oil comes down and the distributors costs become more obvious.

Analysis

A question we have often been asked is "why is home heating oil not the same price as it was when crude oil was this price?".

Rather than look at crude oil, we will consider Kerosene prices which should give a more accurate reflection.

There may be discrepancies. A big reason for the difference is in the exchange rates (as oil is priced in dollars). In November 2007, $64 would have been just over £30. In November 2008, $64 would be around £40. This sort of difference alone would mean oil priced at £300 one year could cost £400 the following year.

What happens when you do not consider the exchange rate?

Stock Market and Home Heating Oil BEFORE exchange rates
The chart above displays oil in cents per litre with home heating oil in pence per litre.
The trend looks different - like decreases in the price of oil on the stock market are not being passed on. Closer to the truth is that drops in the price on the stock market are not being felt because of increases in the value of the dollar.

Our working out

To take into account currency fluctuations, US$ prices have been converted to UK£
US Dollar prices per barrel converted to GBP using daily rates data from RatesFX
A barrel of oil is equal to 42 US gallons or 158.97 litres (1 USA Gallon=3.785 litres)
Amsterdam-Rotterdam-Antwerp (ARA) Kerosene-Type Jet Fuel Spot Price FOB figures taken from EIA (Official Energy Statistics from the U.S. Government)
It may or may not be the best or most accurate indicator to compare with home heating oil prices.
Home heating oil average prices calculated using daily price surveys.