Heating costs accelerated in October, adding to the financial crisis for consumers already facing one of the biggest spikes in energy bills in decades.
The U.S. Labor Department reported on Thursday that fuel oil prices surged 20% last month after falling 2.7% in September. This is significantly higher than the national average increase of 7.7%.
Prices have soared amid a nationwide and global shortage of diesel fuel.
Government data released last month showed the country had just 25 days of diesel supplies remaining, with inventories at their lowest level since 1993. In the Northeast, where more people rely on diesel for heating during the winter, supplies are at a third of their typical levels for this time of year, the Energy Department said.
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The result is skyrocketing prices, likely affecting consumers already facing the worst inflation surge in a generation.
Diesel prices for November delivery soared 38%, which could translate to more expensive Home Heating Oil PricesEspecially in the Northeast, according to Andy Lipow, president of Lipow Oil Associates, LLC.
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Prices are expected to climb further in the coming months, with weekly demand reaching a two-year high, driven by increased reliance on trucking, farming and heating.
“The national average diesel price is $5.30 a gallon today and is expected to rise 15 to 20 cents in the coming weeks,” Lipow said.
The diesel shortage stems from a perfect storm of events. when. . .when COVID-19 pandemic While shutting down swathes of the U.S. economy, in addition to delaying the start-up of new refining capacity, it has caused most refineries to shut down, Lipow said.
The problem was exacerbated by a weeks-long strike at French refineries last month, and experts expect the European Union to start banning purchases of Russian crude and diesel later this year, which will further impact supply.
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On top of that, a phenomenon known as market backwardation, where prices in the short term are higher than prices in the future, makes building inventory “a fool’s errand,” Lipow said.
“All of this is happening at a time when inventories are falling around the world,” he said. “The result is a rapid increase in diesel prices.”