Current Events Affecting Oil Prices
Egypt's influence on oil prices
The recent crisis in Egypt has caused spikes in oil prices. Egypt itself is not a powerful source of oil, producing less than 1% of the world's oil, but it is a population center with a great deal of cultural influence over nearby Arab nations. Oil price analysts are concerned about spreading unrest in other, more significant oil-producing nations.
"As anti-government protests have spread from Tunisia and Egypt to the streets of Bahrain, Yemen and OPEC member countries Algeria, Libya and Iran, concerns about geopolitical risk and the potential for supply disruptions have returned aggressively to the global oil market," said Deutsche Bank oil analyst Soozhana Choi.
Source: Google News, Oil pauses amid simmering geopolitical tensions
At the moment, oil prices have stabilized after the resignation of Egypt's ousted president; however, the future remains unstable. Increasing cost of production and economic recovery brought Charles T. Maxwell, an analyst in the energy business since 1957, to make confident predictions of a continued upward trend in oil prices.
"I think these reasons for the recent spike in oil prices pale in comparison to the true long-term cause, which is that demand for oil continues to rise from greater economic activity around the world." - Charles Maxwell
Source: Barron's, "Whatever Happens in Egypt, Oil Will Hit $300 by 2020," by Lawrence C. Strauss
Gas versus Oil
Considering the market for natural gas is domestic and less vulnerable to these international disturbances, converting your oil heat system to natural gas might seem like an excellent idea. Analyst Joseph E. Meyer recommends natural gas for immediate use, predicting its price should be low for the rest of the heating system. The fact that gas producers are selling futures supports this position.
Source: "Revisiting the Natural Gas Play: Still a Buy," by Joseph E. Meyer
Longer-term, though, gas prices can be expected to rise, too, staying competitive with oil prices. This means that, since oil prices are volatile whereas gas prices are stable, oil prices may dip below gas prices in the future. Source: "Look for Natural Gas Prices to Double" By Wyatt Investment Research
What does that mean to you? It means your best bet is a dual-fuel system. That enables you to switch from gas to oil and back again, whenever you want, in order to take full advantage of whichever fuel is cheaper at any time. Ranco specializes in converting old heating systems to new, more efficient systems, and we can install the right system for you and your house to get the best value for your dollar.
NOAA Predicting a Warm, Wet Spring
Our National Weather Service climate prediction for this spring predicts warm, wet weather for the southern half of the United States, and seasonal weather for the rest. This should mean less pressure on the heating oil and gas market, which might help keep heating bills affordable.
Source: NOAA Seasonal Outlook
Factors affecting oil prices are complex and partially psychological. Short-term fluctuations can be caused by apparently insignificant events if stockbrokers and speculators think they might affect the future oil market. Long-term changes (over the course of a season) are generally the result of major shifts in supply and demand, or on the perception thereof. To learn more about the recent credit crisis and its relationship to oil, read The New York Times' detailed account.