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Heating Oil Explained – Understanding your home’s fuel source

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You heat your home with oil.  But other than seeing the delivery truck in your driveway a few times a year, you don’t know much about it. So what exactly is heating oil? And why is it so critical for your family’s comfort?

What is Heating Oil

Heating oil is a petroleum product refined from crude oil and sold mainly for use in boilers, furnaces, and water heaters.

Who Uses It

According to the U.S. Energy Information Administration, the majority (85%) of U.S. residential and commercial consumption occurs in the Northeast of the country. The top 5 residential consuming states, as of 2017, are:

    1. New York
    2. Pennsylvania
    3. Massachusetts
    4. Connecticut
    5. Maine

Consequently, about 5.7 million households in the United States overall, and 20% of households in the Northeast use oil as their main heating fuel. As a result, in 2017, about 3 billion gallons of oil were sold to these residential consumers and about 35% of the total commercial consumption occurred in the Northeast as well. Many households, in addition to commercial and institutional buildings, also use oil to heat water, though in much smaller amounts. See U.S. Energy Information Administration for more information.

Demand in the Northeast is highly seasonal, so as a result, most usage occurs during the heating season months from October through March. Consequently, demand also affects pricing. See our blog post: Why do home heating oil prices fluctuate?

Where Does Our Supply Come From

The United States has two main sources:

    • Domestic oil refineries
    • Imports from other countries

U.S. refineries supply most of the U.S. distillate demand. However, imports generally supplement supplies during the winter, mostly to help meet the high consumer demand in the Northeast.

How is It Transported

Distillate products are moved throughout the United States by pipelines, tankers, barges, trains, and trucks. Refiners and other suppliers send the product to storage terminals for distribution by local delivery companies, such as Levco, directly to consumers.

Little Known Fact – Heating oil is dyed red. This is required by the Internal Revenue Service because the color identifies the fuel as exempt from the federal, state, and local taxes applied to fuels sold for use on public roadways and as illegal for use in vehicles that normally operate on roadways.

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