Weather affects oil price prediction

08/27/07 12:05PM By Ross Sneyd

(Host) Experts in the heating fuel industry say it's tough to predict how much it will cost to heat your house this winter.

That's because prices can rise or fall with the weather.

Hurricanes in the Gulf of Mexico can slow or halt production and that causes price spikes.

Warmer weather during the winter can reduce demand and send prices down.

Tancred Litterdale is a senior economist with the Energy Information Administration.

He says many consumers who locked into prices late last summer lost money when the weather stayed unseasonably warm well into January.

(Litterdale) "So with 17% warmer weather, you get roughly 17% less consumption. Lower demand means lower prices and that kind of drove heating oil and propane prices down in the winter."

(Host) Litterdale says current projections are that home heating oil and propane prices will be about the same this winter as they were the previous year.

But he says inventories are low and if it turns cold quickly, demand could drive up prices.

Matt Cota of the Vermont Fuel Dealers Association says delivery companies are trying to predict the market, too, as they set prices for the winter.

He says it can be just as difficult for a small dealer to forecast the industry as it is for a consumer.

(Cota) "There's no guaranteed rate of return. It's not an electric utility. There are businesses that go out of business all the time."

(Host) Cota and Litterdale spoke today on VPR's Vermont Edition.

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