Heating Oil is America’s Main Heating Fuel

Heating oil is a petroleum product used by many Americans to heat their homes. Generally, because the demand is higher, heating oil prices are higher during the winter months. Historically, the price of heating oil has fluctuated from year to year and month to month.

Making the demand high, 107 million households in the United States (approximately 8.1 million) depend on heating oil as their main heating fuel. Residential space heating is the primary use for heating oil which makes the demand highly seasonal. And the area of the country most reliant on heating oil is the northeast with most of the heating oil used during October through March. When the prices are likely to be lower, some customers try filling their storage tanks in the summer or early fall to beat rising winter prices. However, most homeowners do not have enough room in their storage tanks to store the full amount needed to meet winter demands. Because homeowners may have to refill their tanks as often as four or five times during the heating season, the possibility of rising or spiking prices is a concern.

Domestic refineries and imports from foreign countries are the basic sources of heating oil in the United States. Refineries produce heating oil as a part of the distillate fuel oil products, which includes heating oils, diesel fuel and jet fuel. Distillate products are shipped throughout the United States by pipelines, barges, tankers, trucks and rail cars. Most imports of distillate fuel oil currently come from Canada and Venezuela. Oil refineries limit the amount of heating oil they make to meet the demands of the winter heating season. Some winter heating oil produced by the refineries in the summer and fall months is stored for winter use. During the coldest winter months, the inventories that are built in the summer and fall are used to help meet the high demand. Refiners can increase heating oil production in the winter to a modest degree, but they quickly reach a point where, to produce more heating oil, they would also have to produce more of other petroleum products which could not be sold in sufficient quantities during the winter months. However, if consumer demand is high for a seasonal product, such as gasoline, refiners may delay producing heating oil for the winter, which may lower inventories at the start of the heating season. This may cause prices to fluctuate. Such was the case in the summer of 2002, when more gasoline was produced to supply the high gasoline demand. As a result, the 2002-2003 heating oil season started with low
inventories.

Heating oil may be delivered to a central distribution area, such as New York Harbor, where it is then redistributed by barge to other consuming areas, such as New England. Once heating oil is in the consuming area, it is redistributed by truck to smaller storage tanks closer to a retail dealer’s customers, or it may be transported directly to the residential customers. Oil companies like Triple Diamond Energy Corporation make certain all distribution areas are sufficiently supplied with enough heating oil to handle the consumer demand.