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November 29, 2018

Heating oil prices lag behind decline in crude oil prices

The Governor's Energy Office conducted its weekly heating fuel price survey on Monday and found the current statewide average cash price for No. 2 heating oil was $2.99 per gallon, down 2 cents from last week and the lowest average price since mid-October.

The average statewide kerosene price is also 2 cents lower than last week ($3.58 per gallon). The average propane price declined 1 cent, and now stands at $2.88 per gallon (for heating customers).

The office reported that after several weeks of price escalations (during September and early October), global crude oil prices have retreated from four-year highs of between $75 ( the North American benchmark price) and $85 (the European benchmark) per barrel. During November, crude oil prices have dropped sharply and currently range between $51 (North America) and $59 (Europe) per barrel, a decline of approximately 30% since the heating season began. According to Bloomberg, prices have not been this volatile since early 2016.

The Governor's Energy Office reported that heating fuel prices have remained rather flat since escalating earlier in the season. Although the price of heating oil generally tracks that of crude oil, there are several market forces which also influence the final price of heating oil delivered to and sold at retail in Maine such as high demand during the winter and the refinery explosion at the Irving refinery in New Brunswick, which has forced Irving to provide alternate supplies during that refinery's shutdown.

"A large percentage of Maine's heating oil is produced at this refinery," the office reported. "The entire Northeast region is experiencing a similar time-lag in refined product prices. All New England states are observing flat pricing, despite the recent decline in crude oil prices. Eventually the lower priced crude will be reflected in the heating oil market, but if demand continues to be high, price reductions may be further delayed."

The price for heating oil is a statewide average; prices in a given geographic region of the state may be considerably higher or lower than this average. This week, within the Energy Office sample, the highest heating oil price found was $3.50 per gallon, and the lowest heating oil price found was $2.49 per gallon.

Also, the statewide average price for propane is based on consumption of at least 900 gallons a year. Households using propane just for cooking or hot water generally pay a higher per-gallon price.

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