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What Affects UK Heating Oil Prices? (2015)

At BoilerJuice we often get asked what we think prices will do over the next few months. Unfortunately, heating oil prices are notoriously difficult to predict, with dozens of factors affecting prices on a daily basis.

While we can’t promise a magic formula for predicting what will happen with heating oil prices in 2015, we do have a few tips to help you out. Check out the info below to learn what affects heating oil prices in the UK and work out how to spot upcoming trends.

factors affecting heating oil prices

Fluctuations in heating oil prices are often the result of a combination of several factors:

Weather

Weather is one of the main factors that affects heating oil prices in the UK. Generally, when temperatures drop, people use their heating more. This can result in a sudden surge in demand for heating oil, which causes prices to spike.

Cold weather also puts more pressure on Suppliers, as it is difficult to manoeuvre delivery tankers in ice or snow. This can cause delivery issues which can drive up the Supplier’s transportation costs.

On the other hand, during warm months there is less demand for heating oil and supply is plentiful so prices tend to decrease. For this reason, a lot of heating oil users choose to stock-up on their heating oil when temperatures are high and prices are low.

WARNING: Extreme weather conditions can affect prices very quickly, so it’s a good idea to keep an eye on weather forecasts and order early when possible.

Supply & Demand

As with any commodity, supply and demand plays a very big part in heating oil pricing. If demand soars when supplies are low, this puts a lot of financial pressure on Suppliers, who are forced to purchase emergency supplies at a higher price. This can also happen if oil production is cut during a period of high demand, as it will be difficult for Suppliers to source their oil.

On the other hand, during times of low demand (for example, during summer, when there is not as much need for heating oil), prices often drop. This can also happen if there are a large number of heating oil suppliers in your local area, as competition can drive down prices.

Refining Costs

Heating oil is a by-product of crude oil, and as such, needs to be broken down and processed before it can be used. This procedure is called distillation and is carried out at an oil refinery. Although Kerosene is one of the easiest (and therefore the cheapest) oil products to distil from crude, there are several factors that can affect the cost of this process. Changes in personnel, equipment, taxes or transportation fees for the companies that carry out this procedure can ultimately affect how much you pay for your heating oil on a domestic level.

Distribution and Delivery Costs

As Suppliers do not produce their own oil, they need to source their supply from the nearest refinery or oil storage facility. There are only a few refineries in the UK, so many suppliers have to travel a considerable distance to collect oil before distributing it to their customers.

As many heating oil users live in remote, rural areas, this can also affect delivery costs, as the tankers have to travel further to get there. However, most suppliers make a conscious effort to reduce these costs, and many even offer a bulk-buy saving to customers who order on the same day in the same area, as this means that the delivery tanker can deliver these orders in one go rather than travelling back and forth over a number of days.

Currency Exchange Rates

As oil is sold in US Dollars, currency exchange rates have a big effect on the price of heating oil in the UK. If the exchange rate between British Pounds and US Dollars shifts, it could affect how much suppliers are paying for their supply, which in turn would affect domestic heating oil prices across the UK.

TIP: As currency rates can be influenced by many things (including political and economic events), it is a good idea to regularly check the market and keep an eye out for changes.

VAT Rates

VAT (also known as value-added tax) is a form of consumption tax that is added to many of the things we use in day-to-day life. Currently, domestic heating oil has a reduced VAT rate of 5%, while heating oil that is used for business purposes (e.g. for agriculture or construction) is generally subject to a standard VAT rate of 20%. The last VAT shift was in January 2011 (from 17.5% to 20%), but if it rises again in the future this could affect heating oil prices.

Crude Oil Prices

As heating oil is a by-product of crude oil, changes in the crude oil market have a huge influence on heating oil prices. If the barrel price of crude increases or decreases, this directly influences how much suppliers will have to pay for their oil supply, which in turn affects the cost of heating oil.

OPEC

OPEC (Organization of the Petroleum Exporting Countries), is an international organization made up of several prominent oil-producing countries. As a large portion of the world’s crude oil reserves are controlled by these countries, this organisation has the ability to influence the production of oil, which can affect supply levels and prices on a global scale.

For example, if OPEC decided to drop their prices to undercut gas rates, there would be a surplus of oil at a low price. On the other hand, if they stopped oil production over a peak period when demand was high, suppliers may struggle to source their oil and heating oil prices could increase.

Did You Know?: OPEC currently consists of Iraq, Kuwait, Iran, Saudi Arabia, Venezuela, Libya, United Arab Emirates, Qatar, Algeria, Nigeria, Ecuador, and Angola.

Conflict in Oil-producing Countries

As crude oil prices have a large influence on heating oil prices, anything that causes those prices to increase can result in higher heating oil costs for customers in the UK. This includes anything that may impact the production or transportation of oil supplies, such as war, conflict, oil spills or natural disasters.

What to Look out For: Any major disruption in countries related to OPEC, as well as other oil-producing countries such as Norway, China, Russia, Mexico, Brazil, Canada and the US.

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Lib Dems Propose Tax Break for Energy Efficient Homes

New manifesto plans unveiled by the party would reward people who take action to boost energy efficiency with a council tax discount.

When reductions in gas and electricity bills are also taken into account, households could save at least £100 a year by adopting eco-friendly measures, according to the Lib Dems.

The party pointed out that household energy use has recently fallen by an average of 2.5 per cent a year, but stressed that “we need to go further and faster”.

Ed Davey, secretary of state for energy and climate change, said the best way to bring down household bills is to reduce them over the long term, which means reducing energy waste in the home.

He added: “A ten-year council tax cut will make action to end your home’s energy waste a no-brainer.

“to meet our legal climate change obligations, the cheapest way is to make rapid progress in cutting our emissions by saving the energy we now waste.”

Mr Davey also underlined the economic importance of efficiency, arguing that it will not be possible to build a stronger economy without environmental awareness and sustainability.

While the government is reportedly on track to meet its target of improving the energy efficiency of one million homes, the Lib Dems said their proposed tax incentive would allow substantial progress in the next parliament.

Recent initiatives to encourage efficiency in the home include the Green Deal Communities scheme, which offered funding for local authorities to help households install measures such as solid wall insulation and new heating systems.

Is Energy Regulator Ofgem to Blame for Higher Fuel Prices?

Nobody ever likes to see heating oil prices rise – we all have budgets to keep to and need fuel for own homes. But consumers generally understand that supply issues can cause price fluctuations at times, and fuel prices may rise when demand is at its highest.

But when price increases are caused by other factors – such as market regulation – this can be a bitter pill to swallow. The question is, to what extent are UK oil prices determined by the actions of Ofgem, Britain’s energy watchdog?

This question could be answered over the next couple of years, as the Competition and Markets Authority (CMA) carries out a wide-ranging review of the energy market. Ofgem has brought about the investigation, believing that homes and businesses are paying too much for fuel. But some think the regulator is partly to blame for high prices.

As reported by the Telegraph, five former regulators have raised concerns about the role played by Ofgem. In a submission to the CMA, the quintet – which includes Stephen Littlechild and Sir Callum McCarthy – criticised regulation imposed by the body since 2008.

They believe the more interventionist regulatory approach has helped increase profits for energy suppliers at their customers’ expense. “Regulatory interventions… can increase customer and supplier transactions costs, leading to lower customer benefits including via higher prices, and weaker rather than stronger competition,” the ex-regulators stated.

Mr Littlechild noted that the combined profits of the Big Six energy firms rose from £233 million in 2009 to £1.1 billion in 2012. He told the Sunday Telegraph that post-tax takings have “gone up consistently” since Ofgem started intervening in the market.

“I’m not aware of anything else that could have caused it,” he told the news provider. “The only thing causing higher profits is the restriction on competition [Ofgem] has imposed.”

The CMA will look at all aspects of competition in the energy market during its investigation, and its report will be telling. It remains to be seen what the findings may be, but consumers will hope the upshot is more affordable fuel for their households.

Unions Call on Labour to Tackle Fuel Poverty

Eight of the largest trade unions in the UK have urged the Labour party to create domestic energy efficiency policies that would reduce fuel poverty and cut consumer bills, while creating jobs and helping the environment.

A letter to Labour leader Ed Miliband was signed by unions including Unison, Prospect, Unite, the University and College Union and GMB.

The organisations outlined a number of measures – based on the Warm Homes report from Unison – they want included in the party’s energy efficiency policies.

One recommendation is a strategy to bring all homes in the UK up to Energy Performance Certificate (EPC) standard B and C.

The unions also called for the introduction of grants for energy efficient measures, with a cap of £10,000. The eventual aim of this would be to bring at least two million households to EPC level B and C by 2020, and for all six million low-income homes to achieve this rating by 2025.

Furthermore, Labour has been urged to promote energy efficiency loans by offering zero interest for those able to pay, while introducing a street-by-street delivery programme led by local authorities.

According to Unison’s Warm Homes report, strategies such as these could save consumers between £300 and £600 a year and preserve local gas supplies.

The unions warned that the UK is approaching “crisis point” in terms of gas resources and could be forced to import up to 70 per cent of gas from abroad within the next five years.

Dave Prentis, general secretary of Unison, said the government’s Green Deal scheme, which is designed to make it easier for homeowners to introduce energy-saving improvements, has “failed miserably”.

He added: “It is a national tragedy that five million homes are languishing in fuel poverty because of poorly insulated homes, and it is these households that are the least well prepared to absorb future increases in energy prices.

“What we desperately need is a strategy that will address the UK’s energy crisis by eliminating the need for large-scale fracking and bring millions of people in from the cold.”

In June this year, the government launched the Green Deal Home Improvement Fund to offer more money back for households introducing energy efficiency measures. The scheme proved so popular it exhausted its budget and was closed to new applications after six weeks.

Essex Villages Suffer Over £15,000 of Oil Theft

Heating oil users living in and around Essex should take special care to ensure their properties and oil tanks are as secure as possible, following a spate of thefts in two villages in the county.

Oil thieves have so far targeted 28 properties in Great Leighs and Little Leighs, the Essex Chronicle reports.

The criminals are thought to be siphoning the oil into barrels and then calling a van to come and collect them.

One local person, who did not want to be named, said that this is occurring on an “industrial scale”, with the thieves sometimes stealing from up to five houses on one night. They have also been brazen enough to return to homes they have targeted before, with residents having to refill their tanks because they rely on the oil.

Another villager, 50-year-old Jeremy Blakemore, revealed that he has had about 1,000 litres of oil stolen. He said members of the community have been patrolling the area in the evening to try to spot the offenders, and also spoke of the mounting concern about the problem.

“Seven houses that we know of in the immediate area have been targeted in the last two or three weeks,” said Mr Blakemore. “It has been really ridiculous; they just keep returning.

“We’re all really worried. We think they are quite well organised because they have come in round the back, cut fences. If you add up the cost of the theft, it could come to more than £15,000.”

A spokesman for Essex Police said this is being treated as a priority crime, with local officers working with the rural crime team to share information and intelligence.

He also revealed that a white van seen in the area where the thefts have been occurring has been circulated on a national police database.

Residents who want advice on tank security can contact Oil Theft Watch, while anyone who sees any suspicious activity is urged to immediately contact the police.

Buy Oil Early Campaign Gets Government Backing

The government has confirmed its support for a campaign that encourages users of heating oil to stock up on the resource now, before winter brings lower temperatures and shorter days.

Order heating oil early to avoid delivery problems

Launched by Action with Communities in Rural England (Acre), the Federation of Petroleum Suppliers (FPS) and Citizens Advice, the Buy Oil Early initiative points out that customers who place their orders promptly can benefit from lower costs and timely delivery.

Prices and demand tend to be lower in September, while transportation of oil is not disrupted by order backlogs and icy weather.

The campaign has received backing from energy minister Matt Hancock, who pointed out that early action can be particularly advantageous for people living in remote and rural areas, where deliveries are more likely to be held up.

He added: “Please do be sure to check that you are receiving all the help that you are entitled to with your local Citizens Advice Bureau.”

Janice Banks, chief executive of Acre, which provides a voice for England’s 38 rural community councils, cited research showed that over a third (36 per cent) of homes in countryside areas are off the gas grid. This means many households in these parts of the country rely on heating oil.

“We are urging households to buy their oil now so that they are prepared when the colder weather arrives and the time comes to switch on the heating,” she added.

In preparation for the launch of the Buy Oil Early campaign, Acre recently published its top ten tips to help heating oil users prepare for the winter.

The organisation recommended predicting your future oil requirements in advance, comparing prices and checking that your distributor adheres to the FPS Code of Practice.

Heating Oil Theft Warning for Norfolk Homeowners

People living in parts of Norfolk have been urged to be aware of the risk of heating oil theft as temperatures begin to fall and the nights get longer.

With an increasing number of homes, farms and commercial premises refilling their oil tanks at this time of year, the local constabulary has called for residents and business owners to be vigilant and take precautions.

The advice coincides with a police request for people in the Postwick and Brundall areas to look out for a man who has been trying to sell heating oil, the Eastern Daily Press reports.

On the morning of Thursday September 11th, the man visited a farm in Brundall and attempted to sell 500 litres of oil, which the police suspect was stolen.

Believed to have been driving a dark saloon-style car, he was described as white, aged 40 to 45, of large build and bald. Anyone with information relating to the man selling oil or possible thefts can contact the police on 101 or make an anonymous call to Crimestoppers on 0800 555 111.

Superintendent Stuart Gunn warned local people that anyone cold-calling them and offering to sell heating oil at a discounted price is likely to be a rogue trader. Anyone who experiences this should call the police immediately.

Supt. Gunn urged oil users to always buy from a reputable source and, once they have taken delivery, to ensure they re-secure their tank and gates.

Have You Been a Victim of Heating Oil Theft?

Anyone who has been the victim of oil theft in the past year and reported it to the police could be eligible to receive a free tank alarm from Norfolk’s Partners Against Crime Taskforce (Pact).

Contact Norfolk Pact on 01953 424727 and quote your crime reference number from Norfolk Constabulary to see if you qualify for the offer. The security device will immediately notify you if there is a quick fall in the oil level in your tank.

Underlining the importance of precautions for heating oil users, Supt Gunn said: “Just as thieves will target vehicles and homes which have been left insecure, criminals will try their luck with tanks where they can easily remove thousands of pounds worth of fuel.

“A few simple security improvements can deter opportunists and ensure you stay warm this winter.”

If you suspect that you have been the victim of heating oil theft, you can notify other heating oil users in your area by reporting it on the Oil Theft Watch website.

Heating Oil Users Could Pay 25% Less to Heat Their Home This Year

With gas and electricity prices still on the rise, it’s no surprise that energy bills are high on the list of homeowner worries. In fact, online watchdog Which? has recently named energy prices as one of the chief financial concerns for consumers, with over 41% of householders stating that they are “worried about the cost of heating their home this winter”.

In a statement released in September this year, the company’s Executive Director, Richard Lloyd, voiced his concern for energy prices, calling for a review of the marketplace.

Mr Lloyd stated: “The energy market remains at rock bottom for consumer trust. Millions of customers still don’t think they’re paying a fair price and most people find it hard to compare deals”.
press-release-price-drop-01 However, despite uncertainty in the mainstream energy market, heating oil users have seen an unprecedented drop in costs. Figures released today by the UK’s leading heating oil comparison site have revealed that households in England are currently paying, on average, up to 25% less for their annual heating oil bill compared to last year, with some customers paying up to £400 less for their annual supply.

BoilerJuice Founder, Paul Ward, believes that while these falling prices may benefit oil users in the short-term, there could be long-term shortage issues if cold weather hits over winter.

Mr Ward commented: “A significant drop in demand, largely due to a warm summer, mild autumn and a reduction in crude oil prices, is contributing to the drop in market prices. However with winter just around the corner, poor weather can typically lead to a sudden increase in demand for heating oil, which in turn can lead to a shortage in supply. If this happens, oil suppliers will be forced to go further afield to source their supply, which can leave customers waiting for deliveries”.

Mr Ward’s thoughts have been echoed by communities across the country, with ACRE (Action with Communities in Rural England) releasing a campaign promoting the benefits of ‘buying early’ to heating oil users in August this year.

Energy Minister Matt Hancock has also voiced concerns about heating oil supply issues, pointing out that this situation can be worsened in remote or rural areas, where tanker drivers struggle to get through on roads covered with ice and snow. Mr Hancock also stated that “delivery times only increase as the weather gets worse”, and urged homeowners to buy their heating oil early to avoid this situation.

As with any household expense, if you do choose to buy early, it is important to compare prices to find the best deal. Use an impartial price comparison site to get the best price for your area and always take advantage of any special offers, deals or benefits offered by distributors (for example, group savings when multiple orders are placed in the same area).

Top 5: Mad Myths About Heating Oil

Want to sort the fact from the fiction? Find out the truth behind the most common rumours as we examine and debunk the top five heating oil myths…

Myth 1: Oil-Powered Heating Systems are Expensive.

While some fossil-fuels can be expensive to produce, kerosene (or ‘heating oil’) is one of the cheapest. This is because it is the simplest by-product of the crude oil distillation process and is essential for many homes across the UK. As such, it has a low VAT rate (especially if purchased for domestic use rather than commercial use).

As heating oil prices are dependent on a number of external factors, they tend to fluctuate throughout the year, however, an independent study commissioned by OFTEC has shown that heating oil is the only “primary heating fuel” that has dropped in price over the last three years, and is in fact much cheaper than the other main off-gas fuel (LPG), costing 40% less on average per year.

To find out about the latest heating oil price trends, check our Price Chart page.

Myth 2: Heating Oil Does Not Heat Your Home as Efficiently as Other Energy Sources.

The effectiveness of your home fuel (also known as the calorific value) refers to how much heat is released by the fuel when it burns. Logged in Kilowatt Hours (kWH), this measurement provides a scale for us to use when comparing how much thermal energy is released by a fuel source during a one hour period of combustion.

As home fuels come in many shapes and forms (for example, liquid forms such as petroleum and solid forms such as coal or wood), it is difficult to directly compare how much heat they give out. However, heating oil tends to have a higher calorific value than that of other popular fuel sources such as coal or propane.

For example, a single litre of heating oil will typically produce 10.38 kWh of thermal heat, compared to8.33 kWh for a Kilogramme of “Group B” domestic coal, or 7.113 kWh for a litre of Propane.

In addition to releasing more heat than these other fuel sources, heating oil-fired boilers also tend to be extremely efficient, with modern boilers achieving efficiency levels of up to 95 per cent. This means that they disperse heat around your home faster, and require less fuel to run.

Myth 3: Heating Oil Use Contributes Significantly to CO2 Emissions.

A lot of people think that heating oil is bad for the environment, however, CO2 emissions from home heating oil is estimated to account for only 0.03 per cent of all CO2 emissions. If you compare this to the 60 per cent that comes from gas-powered boilers, it could be argued that heating oil use has much less of an impact on the environment than some other main fuel sources.

It is also worth noting that when you order with a buying group, through our Group Saving programme, or with any other type of scheme where orders in the same area are grouped, this reduces the number of oil tankers traveling to your area, which in turn cuts CO2 emissions and reduces the environmental impact.

Myth 4: Heating Oil Supply is Dependent on Overseas Suppliers.

While it is true that heating oil supplies are mainly sourced from other countries, this is also the case with most other popular fuel sources. In fact, Norway and Qatar have supplied a majority of the UK’s natural gas supply since 2012.

It is a common myth that oil supplies can dwindle when demand is high because it is sourced abroad, however, with the exception of UK-based renewable fuel sources, this could be said to be true of any major fuel source. While conflict overseas could possibly affect energy supplies for all major fuel types in the UK, this is only likely in very extreme circumstances, as most energy companies purchase their fuel supplies far in advance.

Myth 5: Heating Oil is Dangerous.

Despite horror stories of fires, explosions and oil leaks in the newspapers, when stored and used correctly, heating oil should not be a danger to anyone. Kerosene can be ignited when heated to above 60 degrees Centigrade, however, with the highest recorded temperature in the UK registered at 37 degrees, it is very unlikely that your heating oil could reach a dangerous temperature without being exposed to another heat source.

Similarly, if your heating oil is stored correctly, in a well-maintained tank which is located on a secure base, then you should not be at risk of an oil leak.

If you are unsure whether your heating oil tank, base or boiler adheres to current safety regulations, you should book an appointment with an OFTEC qualified engineer

Learn How to Bleed Your Radiator with National Radiator Day 2014

As the days get shorter and temperatures begin to drop, it is important to make sure that your central heating system is prepared for the long winter nights ahead. Unfortunately, a lot of families will turn on their heating over the next few weeks, only to find that they have cold patches on their radiators.

The easiest way to fix this problem is to remove the air that causes these cold spots by bleeding the radiator. This will not only make your central heating system more efficient, but can help to reduce your heating bills, as an efficient system will use less fuel to heat your home.

In celebration of National Radiator Day (1^st November 2014), we’ve created an infographic to help you get your radiators in tip-top condition for winter.

Follow our simple instructions to remove air from your pipes, quickly and easily!

How to Bleed a Radiator Infographic