Real Estate: Home Heating Costs Fall With OPEC

Offshore Oil -- OurBroker.comReal estate owners rejoice, home heating costs are falling. The latest information from the US Energy Information Administration shows that home heating costs for many owners will fall by as much as $750 this year — and maybe more.

The world is awash with oil and with the end of the Iranian sanctions even more oil is set to flood the marketplace. The result is low prices today and maybe even lower prices tomorrow — some estimates suggest that the price of oil could fall to as little as $10 per barrel, a price which would essentially bankrupt OPEC.

In the first two weeks of the year, said the International Energy Agency on January 19th, oil prices “settled below $30/bbl and a procession of investment banks has  warned that oil prices ‘could’ fall to $25/bbl, $20/bbl or, in one case, $10/bbl. From the world of Big Oil, BP eliminated another 4,000 jobs and Petrobras slashed its five-year investment programme by 25%, clear signs — and there are many other examples — of expectations for a long period of lower prices.”

The latest US government information tells us that how much you save depends on how you heat. The results look like this.

Propane. The most expensive form of home heating and cooking fuel, propane is often used with mobile homes. A typical bill is likely to fall from roughly $1,900 to $1,375 — a savings of $525.

Heating Oil. The drop in heating oil costs is expected to be substantial, falling from about $1,850 to $1,100 or so, a savings of $750.

Electric Heat. Electric users should expect small savings this year, perhaps less than $100. Why? Electric energy comes from regulated monopolies — and the important term is monopolies. Also, in many cases electrical generating stations are powered by coal and nuclear energy, fuels which have a different cost basis when compared with oil.

Natural Gas. In this case also savings will be modest, perhaps less than $100. However, natural gas is the cheapest fuel with winter costs that will likely be a third of expense faced by propane users.

Winter fuel prices fall. OurBroker.com

Could Home Heating Costs Fall Further?

Back in 2014 — just two years ago — oil was priced at more than $100 a barrel, a value which has now fallen to less than $30 and could go lower. Economic slowdowns in Asia and Europe coupled with the growing use of renewable fuels has scuttled the price of oil and may do so for years to come.

For those who are not producing oil the new world of lower prices is great news. It means fewer dollars will be exported overseas, something which helps our balance of payments. It also means the “oil tax” on the American economy has been reduced, so there will be more cash available for savings and consumption. If the US is to enjoy a sustained recovery than lower oil prices are surely welcome.

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