Paper discusses impact of weather, oil prices on pellet demand

By Erin Voegele | February 13, 2018

FutureMetrics has published a brief white paper explaining how weather and the price of heating oil influence demand for wood pellets used for heating. The paper, published Jan. 31, was authored by William Strauss, president of FutureMetrics.

In the paper, Strauss explains that FutureMetrics has been gathering detailed data on retail prices for heating pellets since July. Each month, the company contacts 130 to 160 retail outlets in New England to gather prices for 40-pound bags of pellets and 1 ton pallets of bagged pellets. Prior to July 2017, Future Metrics gathered data on bag and ton pricing from a limited number of sources.

According to Strauss, the current heating season enjoyed a good beginning. While most of the past 10 years have been warmer than the 30-year average, the first three months of the 2017-’18 season have been the coldest in a decade for the New England region.

Data gathered by FutureMetrics shows per-ton pellet prices in Maine, New Hampshire and Massachusetts have remained relatively stable over the last six months of 2017.

Strauss explains that pellet prices have remained much steadier over the past 22 years than heating oil prices. Heating oil, he said, has been as high as the equivalent of $513 per ton of pellets and as low as less than $200 per ton two years ago. The 2015-’16 heating season had the warmest start in recent years, and Strauss noted the combination of low heating oil prices and warm temperatures proved challenging for regional pellet producers.

However, new data gathered by FutureMetrics indicates that the recent increase in heating oil prices and the cold start to the 2017-’18 heating season should increase demand for pellets and for new pellet heating appliances. “If the remainder of the 2017-18 winter is as cold as normal and if heating oil prices remain as high as they are at the end of January 2018, pellet stove and boiler sales should increase significantly in 2018,” Strauss wrote in the paper. “This will expand the base of pellet appliances and, given seasonal winters combined with crude oil prices remaining in the mid to upper $60s per barrel, the prospects for growth in the [New England] U.S. heating pellet markets are much improved.

A full copy of the white paper can be downloaded from the FutureMetrics website.