It is good to hear that based on home heating oil prices predictions, they're predicted to go down this year, and the difference may be at least $15. It's no secret that the prices have been high lately. It's not something that happens once in a blue moon. Instead, the high prices not so long ago are the result of the long time lags in the production of oil.
If you've been keenly observing heating oil price trends for the past three decades, then you know for a fact that the prices then were stable. That's from the 1980s up to early 200. The average price was about $20 per barrel. As outrageous as it sounds, the price actually reached as high as $135 per barrel during the start of the recession. For the past two years meanwhile, it has seen a bit of steadiness but the average of $80 is leaving us little to celebrate. And because of the significantly "upped" price in the past decade, there's been quite a substantial increase in terms of oil exploration activity. To attest to this fact, the era of low oil prices has about two thousand drilling rigs in operation all over the world. Today, where oil prices are mostly high, that number has been doubled.
When there is additional drilling activity, there is also additional oil production. The oil produced in one rig usually lasts for many years. In the oil price hikes that happened in 1973 and 1979, drilling activities increased. So when there was significant increase in oil production because of the increased drilling activities, prices went down by 1986. And as a result, oil exploration naturally followed.
The production of oil saw some gradual growth even after the number of drilling activities took a plunge. What happened then was that activities were focused more on exploring new sources of oil. When oil prices went down, it didn't make sense to perform risky and dangerous drilling. In today's status of oil production, we can rightfully say that there's been some strong drilling activity sustained for several years. It's good to hear that there are still new areas or fields discovered that have potential to become new sources. As a result of this, there is more stability in terms of production. Americans who rely on heating oil for the winter will view this as great news.
Now how about in the past year when production was seen to be a bit soft? Is that an indication that heating oil prices will again rise? For one, it's actually a manifestation of weak demand. But then again, everyone must understand that because of the trend wherein production capacity is growing faster compared to demand, what it means is that prices are more likely to go down than up.
It may be something that the proponents of natural gas, propane, or electricity strongly disagree, but the thing is when it comes to heating oil prices for the coming years, there is some positive light for those prices to decline and eventually even go down to cheaper than $80 per barrel. It is not impossible. Based on predictions and projections, it is inevitable.Heating Oil Prices