The Price of Oil vs the Price of Wood Pellets

Feb 06, 2017 | oil prices

Some people switch to wood pellets because they want to support the local economy. Other people switch to pellets because they want to make a positive effect on the environment. But what about the people who want to save money? Are pellets the way to go?

 

oil prices versus wood pellet prices

image credit: Paul Lowry (CC BY-SA 2.0)

 

When people switch to pellet heat, they’re often switching from a heating system that relies on oil. Heating oil comes from crude oil, also known as petroleum, which is used to create thousands of products, including gasoline, diesel, jet fuel, kerosene, and many others. Crude oil is drilled from the ground in several different countries. The top five oil-producing countries are Saudi Arabia, Russia, United States, Iran, and China. The United States is also one of the top five consumers of crude oil.

 

One financial benefit to heating with wood pellets is that the price doesn’t fluctuate as oil prices do. The price of wood pellets is steady—it doesn’t change much from year to year, because the industry is controlled. A healthy forestry plan includes cutting down trees so that other trees can flourish, which means there is a consistent supply of raw material from which wood pellets are made. 

 

Purchasing an energy-efficient wood pellet heating system and getting your pellets delivered in bulk means that you won’t be subject to any unfortunate surprises in terms of heating costs. That’s one great financial benefit to heating with wood pellets.

 

Oil prices, on the other hand, are not stable. Oil prices rise and drop because of supply and demand. When countries around the world are pumping lots of oil, the price of oil drops, because the companies are competing with each other to sell that abundance. When companies are not pumping as much oil, the price tends to go up, because customers are competing with each other for that oil and are willing to pay a higher price to get it.

 

Wood pellet prices aren’t subject to the same volatility as oil prices.

 

For several years, oil prices were at record lows. Heating fuel was cheap! More companies were pumping more oil and the result was plenty of oil at cheap prices. However, oil companies don’t drill for oil at a constant rate. Many factors can affect the rate of production, including political upheaval, war, and economic disruption. Countries can also make agreements to limit the amount of oil being pumped out of the land, which can help keep oil prices higher and oil companies more profitable. It’s a fine balance.

 

In fact, the price of crude oil has doubled in the past year. Heating fuel is no longer quite so cheap. This is at least partly because OPEC, or the Organization of the Petroleum Exporting Countries, agreed to cut the rate of drilling in order to help alter the historic fall in prices. The countries of OPEC, including Saudi Arabia, Kuwait, and Algeria, have all curbed oil production enough that the price of oil is starting to rise.

 

All this means it’s a terrific time to switch to pellet heat. It can be hard to give up cheap oil heat to put your money toward a renewable energy, but now that oil prices have risen, wood pellets are making more economic sense.

 

Besides—at the current rate of oil consumption, worldwide oil reserves are projected to be depleted, perhaps as soon as 2039.

 

Heating with wood pellets not only provides you some energy independence from the up-and-down inconsistency of oil prices, it also means being part of the environmental solution to sustainable fuel. By investing in the local economy, you not only help your own wallet, but you contribute to the financial health of the towns around you.

 

 

 

Learn how to save $100s when you convert to pellet heat

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