Where does heating oil come from?

Heating oil is refined from crude oil. The United States has two sources of heating oil:

  • Domestic oil refineries
  • Imports from foreign countries

Refineries produce heating oil as a part of the distillate fuel category of petroleum products. Distilates include heating oil and diesel fuel. Heating oil generally has higher sulfur content than diesel fuel. Distillate products are moved throughout the United States by pipelines, tankers (ships), barges, trains, and trucks.

Winter heating oil inventories are built up during summer and fall

Refiners have limitations on the amount of heating oil they can make to meet consumer demand during the winter heating season. Refiners can increase heating oil production in the winter, but that means they also have to produce greater amounts of other petroleum products. If there is not a market for the larger volumes of other petroleum products, this may limit the amount of extra heating oil that they produce. Therefore, some of the heating oil that refiners produce in the summer and fall months is stored for sale in the winter. During the coldest winter months, these inventories are used to help meet demand.

Did you know?

Refiners may delay producing heating oil for the winter if consumer demand is high for a seasonal product like gasoline. This may result in lower heating oil inventories at the beginning of the heating season. This was the case in September and October 2005, after Hurricane Katrina and Hurricane Rita resulted in the shutdown of some Gulf Coast refineries. As gasoline prices increased to more than $3.00 per gallon, refiners had an incentive to produce more gasoline at a time when they would normally concentrate on heating oil production.

Imports supplement domestic production

Heating oil is imported from other countries to supplement U.S. refinery production and inventories. Most U.S. imports of distillate come from Canada and Russia and are imported into the East Coast.

How heating oil is transported to customers

Heating oil is brought to storage terminals by refiners and other suppliers. For example, 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 like 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 is redistributed directly to residential customers.