Your Home Heating Oil Price

Domestic heating oil prices vary from oil supplier to oil supplier, depending on how they operate. This section will help explain in a little more detail how your heating oil price is calculated from the refinery to your tank.

• The refinery - Each refinery has its own cost of production. The refinery running costs, their overheads (staff wages etc) all have an impact on what they can sell a litre of oil for.
• The cost of moving the heating oil from the refiner to the supplier - Heating oil suppliers usually buy in bulk. This can come in the form of an articulated tanker load or even sometimes a canal barge load! The cost of the heating oil will vary depending on which supplier they buy it from. They may have preferential agreements with certain refineries. There is also then the cost of the transport of the fuel from the refinery to the oil suppliers storage facilities. If the refinery is close by, the haulage cost will only have a small impact on the cost of the oil. If the refinery is far away, then the cost of haulage will be larger and so there will be a greater impact on the cost of the litre of heating oil.
• The costs of running the business and the delivery vehicle - The next cost which is added to the cost of your heating oil is the costs of running the oil supplier's business. Their overheads include, wages, cost of running the facility, heating, light etc. There is also the cost of getting the heating oil from the supplier to your home. An oil supplier usually has an approximate pence per litre figure that they work to for delivery.
• The supplier's profit - The next addition to the cost of your heating oil is the supplier's profit. Domestic oil suppliers will usually try and work to an approximate margin, where they can be competitive in the market place for the customer, while meeting the performance expectations placed on them by internal and external shareholders. This could be the owner, board or even the bank!
• VAT - The VAT on kerosene home heating oil is 5%. This is the added cost which goes to the tax man.
• The total - This then gives you the price you pay for your home heating oil.

In short, the basic sum is:

The price paid by you the customer =

Cost of home heating oil (How much a supplier pays for its heating oil)
+ Delivery costs (cost of tankers, diesel, drivers' wages, etc.)
+ Operating costs (salaries, computers, office costs, etc.)
+ Profit (suppliers need to get something out of the deal!)
+ VAT (Gordon Brown's share)