As we all say goodbye to the second warmest year on record, 2023, we leap into 2024 amidst expectations of lower temperatures impacting business oil demand and subsequently prices. However, the volatile landscape of off-grid fuel is not solely dictated by weather patterns but intricately woven with geopolitical dynamics, global supply chains, and continuing concerns over major producers like Russia. In this blog, we delve into the past year's events which have shaped the industry, dissecting their implications for our business oil users, and forecasting their impact in the early days of 2024.
A Renewed Focus on Alternatives
Shifting Government Stance on Net Zero
In September, a significant policy shift occurred as the government extended the off-grid fossil fuel boiler phase-out to 2035, embracing an 80% reduction instead of the initially planned 100%. The assurance that existing oil boilers need not be replaced with heat pumps provided relief to many across England and Wales reliant on kerosene for heating.
HVO - The Renewable Alternative to Diesel
Since December, our commitment to providing environmentally conscious solutions has led us to offer businesses HVO (Hydrotreated Vegetable Oil) as a renewable alternative to diesel. With this new offering, we've empowered off-grid companies to make eco-friendly choices, reducing their carbon footprint by up to 90%.
The Spring Budget 2023
In the aftermath of the Spring Budget 2023, the government implemented pivotal changes to assist industrial heating oil (IHO) and kerosene users in non-domestic properties. Until April 28th 2023, organisations could apply for a fixed £150 payment to offset energy bills for non-grid-connected properties. This support extended to the use of rebated kerosene and IHO for heating on business premises. A financial support scheme was launched, offering tiered top-up payments for properties consuming over 10,000 litres of heating oil. While the scheme covered various non-domestic properties, businesses with grid-connected properties automatically received a £150 payment, while off-grid businesses had to apply through a portal, which closed on April 28th, 2023.
The Changes in Oil Prices: Peaks and Valleys
Relief After Geopolitical Tensions
Following the heightened heating oil prices stemming from the Russian invasion of Ukraine in February 2022, early 2023 brought relief with increased global oil production and easing geopolitical tensions. However, this respite was short-lived.
Summer Heat Spurs Oil Price Surge
Contrary to conventional trends, the summer of 2023 witnessed a rise in oil prices. Saudi Arabia, one of the largest oil suppliers within the OPEC+ group, announced in July 2023 a cut in crude oil production by 1 million barrels a day, which fuelled market uncertainty. The delicate balance of supply and demand led to an uptick in prices.
Autumn Controversy Surrounds Rosebank Oil Field
As autumn unfolded, the approval of development and product consent for Rosebank, Britain's largest untapped oil field, 80 miles west of Shetland, stirred controversy. Despite conflicting views on its alignment with climate commitments, Prime Minister Rishi Sunak defended the decision, emphasising the importance of domestic energy security.
December's Disruptions in the Red Sea
The closing month of 2023 saw major shipping firms halting commercial shipments of oil and gas through the Red Sea, triggered by a drone attack launched by Houthi rebels in Yemen. While concerns arose over potential oil price impacts, the situation had minimal effects, with a brief initial rise of just under 2% in barrel prices.
Peering into 2024: OPEC+ Uncertainties
As we navigate the uncertainties of 2024, the off-grid fuel market remains unpredictable. Recent reports from Reuters highlight scepticism about OPEC+'s ability to sustain oil supply cuts. Analysts anticipate stable or lower average prices in 2024 compared to 2023, promising positive outcomes for businesses relying on oil.
And there is always Red Diesel or GO:35. A cost-effective and eco-friendly alternative for commercial heating which is now available for businesses. With no excise duty, it offers significant cost savings, making it an appealing option for industrial applications. Notably, GO:35 seamlessly integrates with existing boilers, eliminating the need for tank modifications. Tailored for commercial and industrial use, it ensures long-term stability, winter-grade performance, and zero bio content, enabling bulk storage without the risk of spoilage or interruption.
For off-grid businesses navigating these uncertain waters, Northern Energy remains committed to providing great value, reliable deliveries, and top-tier customer service. And that's whatever fuel you use - business oil, HVO or Red Diesel. Contact us today to ensure your off-grid fuel needs are met with efficiency and expertise.