Crude oil is the source of a number of important fuels, including gasoline, heating oil and diesel. Because these fuels all have the same starting point, refineries must decide what to produce when, based on a mix of supply and demand calculations.

HEATING OIL PRICES ARE LINKED TO CRUDE OIL PRICES

The price a refiner pays for crude oil is the chief factor determining the cost of home heating oil to the consumer.

For more information, see the EIA Report:
Residential Heating Oil Prices: What Consumers Should Know

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REFINING DECISIONS AFFECT HEATING OIL SUPPLY

Refineries generally try to produce as much gasoline as possible to meet the needs of our nation's growing economy. Most heating oil production takes place in the winter months, when demand is highest and the summer driving season is over, which slightly reduces demand for gasoline. Additional heating oil is produced and stored during the summer and fall in an effort to ensure there is enough heating oil to meet consumer demand.

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WEATHER, OTHER VARIABLES CAN AFFECT HEATING OIL PRICES

A variety of circumstances can squeeze a refiner's ability to meet demand for heating oil and contribute to higher prices.

• If summertime gasoline demand is greater than expected, refiners may need to delay producing heating oil. This may reduce supplies at the onset of cooler weather.
• Sudden increases in demand, caused by severe cold weather, will also cause prices to rise, as additional heating oil must be bought and transported from the Gulf Coast and/or Europe.
• Severe weather along Gulf Coast, such as Hurricane Katrina, can disrupt heating oil production. 47 percent of the nation's refinery capacity is located in the Gulf Coast region. In addition, terminals in that region receive 60 percent of crude oil imports to the United States.

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TIPS FOR LOWER FUEL BILLS

• Talk to your dealer about participating in a budget plan to help stabilize your monthly bill.
• Your heating oil dealer may also offer fixed price programs that can help keep costs down.

Also look for ways to improve your home's energy efficiency. The following suggestions come from the U.S. Department of Energy's Energy Information Administration:

• You can obtain a home energy audit from your supplier to ensure that your furnace and appliances are running efficiently before the season begins.
• You can achieve conservation gains by weatherizing your home, i.e., installing the proper insulation in your house and around your hot water heater. Quick and easy fixes such as caulking and weather stripping windows and doors to seal out cold air also help save energy.
• Installing a programmable thermostat and reducing temperature settings on your thermostat, especially when you are not at home, are other ways to reduce your heating fuel costs.

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Here's a quick look at the environmental performance of today's high-efficiency home heating oil systems.

• Residential oil burners produce less than one-third of one percent (.003) of total particulate emissions in the United States.
• The emissions from a home heating oil are about the same as those from a similar-size gas burner.
• New oil heating systems boast energy efficiency ratings ranging from 83 to 94 percent. By contrast, the energy efficiency ratings for electric heat pumps range from 51 to 82 percent, depending on the technology used.

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