I live in the Northeast, and like millions of New Englanders, our home relies on heating oil. Our tank was filled last week, and the $1,200 price tag was shocking, especially considering that in the middle of winter we’ll likely need to fill it every six weeks.
Given the just-released CPI inflation report for September, I’m not the only one feeling the price shock. The CPI report shows that prices for all goods increased by 3.7% annually, largely due to a sharp 34% increase in gasoline prices and an eye-opening 74% annual increase in fuel oil prices.
Consumers are under pressure ahead of November’s contentious midterm elections, with consumer sentiment sluggish.
Higher prices tax consumer budgets
The increase in heating oil is truly amazing and can be felt. Overall, 4.79 million households use heating oil as their primary heat source, with approximately 82% of these households located in the Northeast.
The average tank capacity is 275 gallons, and the average price of heating oil in the United States on October 12 was $6.14 per gallon, according to EIA, which means the per-capita price for a full tank was $1,689.
That’s bad news, especially considering that 43% of Americans can’t cover a $1,000 emergency expense and 32% have no emergency savings at all, according to Empower.
However, it’s not just fuel that’s driving up our costs.
Even when economists strip out the volatile energy and food components, so-called “core” CPI rose 2.6%, above Wall Street expectations of 2.5% and up from 2.4% in August.
However, unlike economists, we do not have the ability to exclude food and energy costs from our budgets. People need to eat, and they often need to drive to make money to pay for groceries and heat their homes in the winter.
The pain from pumps and furnaces is a real cost, not a theoretical one, and it’s already weighing on consumer confidence, which has been falling over the past six months.
“Based on the six-month moving average, everyone’s confidence age group and almost all income group trending downward,” according to The Conference Board’s Consumer Confidence Index.
Crude oil drives up heating oil, gasoline prices
Energy is the biggest driver of overall inflation, and soaring energy prices are directly linked to the negative impact on oil supplies from conflicts in the Middle East between the United States, Israel and Iran.
Crude oil prices, as measured by West Texas crude, have risen from below $60 a barrel to $95 this year. AAA reports that the price of a gallon of gasoline has climbed to $4.33 from $3.08 a year ago. Diesel prices are even worse, rising to $6.30 a gallon from $3.66 last year.
Unfortunately, rising wages have not offset rising prices. Real wages, subtracting inflation from wage growth.
The U.S. Bureau of Labor Statistics reported that “on a seasonally adjusted basis, real average hourly earnings for all workers fell 0.5% from August to September.” “Real average hourly earnings fell 0.7% on a seasonally adjusted basis from September 2025 to September 2026.”
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Not much good news on inflation, prices and lending
The disruption to Middle East oil supplies is caused by limited tanker traffic through the Strait of Hormuz, which historically carries 20% of global oil supplies.
There are few signs that overseas tensions are easing, and prices are unlikely to ease without a major breakthrough.
Given seasonality, price pressure is likely to be greater, especially for fuel oil. Unlike gasoline, whose costs are spread out over time, fuel bills can quickly deplete emergency savings. Historically, heating oil costs have risen with increased winter demand, suggesting we haven’t seen its peak yet.
“Fuel expenditures will grow fastest among households that primarily use heating oil,” the U.S. Energy Information Administration (EIA) wrote in its October Short-Term Energy Forecast. “These households face heating oil prices that are more than 30% higher than last winter, although we expect heating oil expenditures to increase by 21%, offset by this year’s milder winter in the Northeast.
NEADA’s goal is to increase the cost of heating with oil this season by 50%, or $2,627. Just a few weeks ago, it was forecasting 31% growth, but that forecast has been forced higher due to the recent price surge.
“Winter is coming and families have little time to prepare,” said NEADA Executive Director Mark Wolfe.
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