The price of oil will continue to fall over the next two years against a backdrop of rising gas and electricity costs if current trends continue, according to new research published today.
A study commissioned by the oil heating trade body, OFTEC, and the Federation of Petroleum Suppliers (FPS), has used the historical relationship between Brent crude oil and kerosene prices to predict kerosene costs in the UK and Ireland up to and including early 2017. The results forecast that by Q4 2014, the price of kerosene will have reached 55.52ppl in the UK and 75.81¢pl in the Republic of Ireland. From there, prices are forecast to drop over the coming three years to reach 54.00 ppl in the UK and 74.10¢pl in the Republic of Ireland by Q4 2016. The forecasts show that prices will fall further into Q2 2017 to reach 53.43 ppl and 73.39¢pl respectively.
The predicted drop in heating oil prices comes at a time when gas and electricity prices are continuing to rise, evidenced by the latest Sutherland Tables data, an industry-recognised source of comparative UK domestic heating costs.
These figures show the average annual cost of heating a three bedroom home by gas and electricity has increased over the last three years by 34% and 27% respectively. This compares to the cost of using an oil condensing boiler which has fallen by 12% over the same period and is now just £9 more per annum than gas to heat the same house. The National Audit Office (NAO) also recently predicted that consumers face almost two decades of price rises for electricity, gas and water to fund £310 billion worth of new infrastructure projects to ensure Britain’s energy, water and telecoms networks remain up-to-date.
Jeremy Hawksley, Director General at OFTEC comments, “The future oil price analysis is based on the long-standing and well-documented relationship between the global price of crude oil and the price of kerosene. Putting aside current economic and political factors, the research clearly suggests the price of oil will continue to fall, as it has over the past three years, making the fuel more affordable and competitive, and the cheapest option going forward for most off-gas homes.”
The research, carried out by UX Energy Services, recognises the impact both domestic and overseas factors could have on the price of crude oil and therefore kerosene, most notably the volatile situation in Iraq which has caused the price of Brent crude oil to spike recently to a nine month high. Exchange rate fluctuations and potential US energy sanctions over Russia could also result in further oil price variations.
Jeremy adds, “It is of course impossible to predict how future world events will pan out and exactly how these will affect the price of oil. However, the research remains valid and shows that the general trend of falling oil prices is expected to continue which is good news for the one million oil fired households in UK and Republic of Ireland.”