Heating oil is an efficient, cost-effective fuel that us used to heat homes and their water supplies. Some householders choose this fuel source because of cost issues, while others have no choice, given their remoteness from energy networks. Whatever category you fall into, it’s always a good idea to know exactly what you’re dealing with.
Here’s everything you need to know about heating oil — so you can make the right choice when it’s time to choose a provider.
Heating Oil is Made from Crude Oil
Heating oil comes from the crude oil used to produce petroleum and kerosene. Nowadays, America imports more oil than it exports. The likes of Saudi Arabia, Venezuela and Iraq can all extract oil from the ground far more cheaply than the USA, making the fuels created cheaper.
The oil used to heat homes is extracted using the fractional distillation process. The oil is heated to a very high temperature until it boils. The vapor rises and enters the fractional distillation column. But because each of the oil products (petroleum, diesel, fuel oil etc.) have different boiling points, they turn into gas at different stages. The vapors are condensed, and the resulting liquid is collected before the next oil product vaporizes.
Heating oil is very similar to diesel — an alternative to gasoline (petroleum). The Internal Revenue Service insists that all heating oil is dyed red to indicate it’s not allowed for use on highways. This is because specific taxes are applied to road fuels.
The Transportation of Heating Oil
The heating oil is distilled and purified before it is loaded into road tankers and delivered to storage terminals — owned by heating oil suppliers. These regional depots then distribute the oil to towns and cities in the local area. Homes have oil storage tanks that feed into their heating systems.
How Do Distilleries Manage Heating Oil Production?
Refineries face restrictions on how much heating oil they can produce during the winter. This is because the federal government always prioritizes automotive and aviation fuel to keep the country moving. As a result, a lot of the heating oil used in America is imported from Canada and the Middle East.
Production is managed according to demand. But when seasonal demand for gasoline is at its highest, heating oil production is usually at its lowest. During an immediately after major natural disasters such as hurricanes and earthquakes, oil refining is often hit hard. Gasoline prices spiral upwards, incentivizing refineries to produce gas instead of heating oil.
As a result of this relationship with consumer markets, the price of heating oil can fluctuate considerably. This is why a lot of consumers sign up to long-term supply agreements that freeze prices for a fixed period.
Where Does the Heating Oil Go?
Regional suppliers send oil to homes and businesses by road in smaller tankers. According to the U.S. Energy Information Administration, 5.7 million homes in America use oil as their primary heating source — which makes demand highly seasonal. There is usually a glut of supply during the summer, but demand (and prices) rise steeply during the cold, winter months.
Most of the heating oil sold in America today goes to homes in the Northeast. Remote regions of Maine, New York, Pennsylvania, Connecticut and Massachusetts receive around 80 percent of the nation’s total supply.
The seasonal nature of heating oil prices means shopping around for the best deal is crucial. By finding the best long-term price in your area, you can sign up for consistent prices that won’t fluctuate during the contract period. This allows you to budget — and slash the cost of heating your home.