Where Does Heating Oil Come From?
Did You Know?
Most imports of distillate products come from Canada, the Virgin Islands, and Russia.
Heating oil is refined from crude oil. The United States has two sources of heating oil:
- Domestic refineries
- Imports from foreign countries
Refineries produce heating oil as a part of the “distillate fuel oil” product family, which includes heating oils and diesel fuel. Distillate products are shipped throughout the United States by pipelines, barges, tankers, trucks and rail cars.
Winter Heating Oil Inventories Are Built Up During Summer and Fall
Refiners are limited in the amount of heating oil they can make to meet the demands of the winter heating season. Some winter heating oil is produced by refineries in the summer and fall months and stored for winter use. During the coldest winter months, the inventories that are built in summer and fall are used to help meet the high demand.
Did You Know?
Refiners can increase heating oil production in the winter to a modest degree, but they quickly reach a point where, to produce more heating oil, they would also have to produce more of other petroleum products which could not be sold in sufficient quantities during the winter months.
However, if consumer demand is high for a seasonal product, such as gasoline, refiners may delay producing heating oil for the winter, which may lower inventories at the start of the heating season. This was the case in September and October 2005, after Hurricanes Katrina and Rita shut down Gulf Coast production capacity. As gasoline prices shot up over $3.00 per gallon, refiners had incentive to produce more gasoline at a time when they would normally concentrate on heating oil production.
How Heating Oil Is Transported to Customers
Heating oil is brought into oil storage terminals in an area 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, such as 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 directly to residential customers.