Energy Institute

Where does the price of our home heating oil come from?

There are two grades of home heating oil sold in Ireland – traditional gasoil and the more frequently used kerosene. As with the case for petrol and diesel, the price of gasoil and kerosene imported into Ireland is benchmarked against the Platts’ price for product traded in the Amsterdam-Rotterdam-Antwerp region (ARA). The price of these refined products may move independently of the crude oil price and reflect the actual market conditions; for example, prices will tend to rise with a weather driven surge in demand across Northern Europe. The industry components of cost associated with storage, distribution and delivery are relatively fixed as are excise duties.

Ireland is relatively unique in European markets in its high dependence on oil for home heating with almost 45% of homes heated with oil 1. This compares to the 4% of homes using oil as their primary heating source in the UK.

Oil tanks in domestic homes are small and the average oil delivery is about 700 litres. This small drop size, coupled with the need to access narrow roads and housing estates means that domestic deliveries are made in relatively small (20,000 litre) vehicles. This in turn drives a need to have intermediate storage facilities (depots) strategically located across the country. These depots are owned and operated by about 300 distributors in the Republic with a similar proportion in Northern Ireland.

Once imported into one of the sea port terminals, the product is sold by the importer to the oil distributor, again using the Platts benchmark pricing of the import price. The local oil distributor then sells on to the end consumer. In the case of home heating oil, the level of excise taxes and VAT (€50.73/1,000L 2 for kerosene and 13.5% VAT 3) is much lower than that for petrol and diesel (€587.71/1,000L for petrol and 23% VAT) and hence the decline in home heating oil prices has more closely reflected the fall in crude pricing.