Roughly 7.7 million U.S. households, more than two-thirds of them in the Northeast, use heating oil. As with other fuels used for space heating (especially propane and natural gas), residential customers have been concerned about heating oil prices this heating season. The Energy Information Administration has prepared the third in its series of heating fuel pamphlets, Residential Heating Oil Prices: What Consumers Should Know, to provide information that may address these concerns.

Heating oil is both refined domestically and imported, mainly from Canada, the Virgin Islands, and Venezuela. Some of the heating oil refined during the summer and fall is stored in anticipation of higher demand during the colder winter months. The amount available from these inventories can vary from the beginning of one heating season to another, depending on demand for and production of other products (such as gasoline) prior to the heating season.

Heating Oil Price Components, 1999

Excluding taxes, the price of a gallon of heating oil can be split into three components (see figure). In 1999, the cost of crude oil accounted for about 48 percent of the cost of heating oil, while refining costs accounted for 7 percent, and marketing and distribution costs the remaining 45 percent.

Heating oil prices can vary from year to year as crude oil costs rise and fall, as well as in response to other factors. These include competition (or lack of it) in local markets and regional differences in operating costs, such as transportation, employee compensation, insurance, State and local fees, and others.

If crude oil prices are reasonably steady, inventories are adequate at the beginning of the heating season, and there are no cold snaps, heating oil prices will likely be stable. However, the failure of one or more of these conditions can sometimes trigger surges in heating oil prices. A sudden drop in temperatures will cause demand to rise even as supplies may become tighter, as frozen harbors and rivers and other factors interfere with timely delivery. As existing stocks are drawn down, wholesale buyers bid up prices for available product. Resupply can take two or three weeks, while cold snaps can also cause some customers to switch from competing fuels (natural gas or kerosene), thus driving demand for heating oil even higher and putting additional upward pressure on prices.

Regularly updated information on heating oil demand, prices, and inventories can be obtained from EIA's Website.

Residential Heating Oil Prices: What Consumers Should Know, DOE/EIA-X048; tri-fold color pamphlet.

Questions about the pamphlet's content should be directed to:

Alice Lippert, Office of Oil and Gas

alice.lippert@eia.doe.gov

Phone: (202) 586-9600

If you are having technical problems with this site, please contact the EIA Webmaster at wmaster@eia.doe.gov or call 202-586-8959. To request copies of the brochure or for general information about energy, contact the National Energy Information Center at 202-586-8800 or infoctr@eia.doe.gov.

URL: http://www.eia.doe.gov/emeu/plugs/plheat.html
File last modified: December 19, 2000