The price of heating oil rises 50% in a year - leaving 1m UK families struggling to stay warm

The price of heating oil has risen by 50% in a year, hitting more than 1m UK households who rely on the fuel to heat their homes. With oil prices not protected by the energy price cap, many families fear the cost could climb further.

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Families reliant on oil to heat their homes are facing rocketing bills, made worse by the war in Ukraine.

Around 1.5m UK households live off the gas grid and instead use oil to power their boilers.

But prices have risen by 50% in a year and as oil is not covered by the energy price cap, households have no way of knowing how much higher the cost could go.

Some families say they have been left unable to cope with the rising costs and are having to turn off their heating to be able to afford food.

People with oil boilers have to buy the fuel in bulk from suppliers and store it at their properties in tanks.

The price of the fuel is closely linked to the cost of crude oil which has increased dramatically after Russia’s invasion of Ukraine.

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‘We are literally huddled in one room to stay warm’

Sara Weir, 48, lives in Magherafelt, Derry, with her three children. The family have been living without any heating or hot water for more than a month as they can’t afford the increasing oil prices.

Sara, who is on Universal Credit, last filled up her oil tank in December after buying 500 litres of oil, but this ran out at the start of March when prices were soaring.

“It’s been a nightmare,” she said.

“I was spending around £300 a month on oil around December time. But when I ran out of oil a month ago, the price shot up. Now to heat my home and have hot water, I would need to spend £600 a month. I just can’t afford it.

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“It’s a real crisis for people in Northern Ireland and there’s no alternative heating here.”

In Derry City and Strabane, the council area where Sara lives, six out of every seven homes have oil-powered heating systems.

The smallest amount that oil companies would normally deliver is 200 litres, which Sara said would cost around £180 but would only last her family a week or a week and a half.

They have instead had to think of other ways to keep warm, such as making hot water bottles.

“It’s been difficult, we had to choose between heating and food,” Sara said.

“Because of the way it works with oil heating, you have to have a large sum of money to fill an oil tank in your garden. You either have no heating or you have heating. It’s not like electricity and gas.

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“I have to boil the kettle to wash the dishes and I have a closed fire in one of the rooms. I also have to get my children some hot water bottles that they can go to bed with. Other than that, we are literally huddled in one room to stay warm.”

The regions worst hit

There will be many families in similar situations, especially in areas where more houses rely on oil heating, according to John Barry, professor of green political economy at Queen’s University Belfast.

Professor John Barry

In Northern Ireland, for instance, two-thirds (68%) of central heating systems are fuelled by oil, according to the Northern Ireland House Condition Survey of 2016.

“We are only now extending the gas network into the west of the province and this means that many parts of Northern Ireland outside Belfast are still reliant on either coal or oil,” Prof Barry said.

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In addition, households on low incomes are often unable to pay the upfront capital costs for gas boilers or other more efficient heating sources such as heat pumps.

Prof Barry said: “If you link oil dependence to the fact that Northern Ireland has some of the worst insulated houses, Northern Ireland has the highest level of fuel poverty in the UK.”

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Across Great Britain, oil use is lower but rural areas are often particularly reliant on the fuel.

About 8% of homes in Wales are heated by oil boilers, with more than one in three households in Ceredigion and more than a quarter in Powys using the fuel, according to the Office for National Statistics.

In England, about 3% of households use the fuel, although this rises to 7% in the South West and East of England.

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Around one in 20 homes in Scotland use oil boilers, Census data from 2011 shows.

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‘Our oil suppliers were moving away from Russia stock’

The fast-moving price of heating oil means many suppliers now don’t allow households to order and pay for deliveries a week in advance, instead telling them the price the day before.

According to the UK and Ireland Fuel Distributors Association (UKIFDA), oil companies buy oil from refineries or terminals, which is then stored in their local depots. As they can only hold two to three days worth of supply, companies have to make very regular purchases to refill their stock, paying prices that are set on the day.

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They said it has been very difficult for them to tell the consumers how much it will cost because prices are changing rapidly and their supply only lasts two to three days.

“In the first ten days of the invasion of Ukraine, prices went up between five and 10p a day, ” Ken Cronin, its chief executive, said.

“They peaked at around £1.40 to £1.50 and where they are now is around 95p to £1.10. When you’ve got prices moving so quickly, it is almost impossible to give customers prices. Another challenge for us was that our oil suppliers were moving away from Russia stock which caused shortages and disruption in the market.”

Currently, heating oil prices are lower than a month ago. According to BoilerJuice, a price comparison site for home heating oil, the average price was 97p per litre on April 5, which has decreased from £1.60 on March 10.

Prices ‘very volatile’

Tim Buckman of BoilerJuice

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Tim Buckman, chief marketing officer at BoilerJuice, said: “Prices do seem to have stabilised and I think heating oil prices have the opportunity to come down a little bit further now that demand is going down, but it’s obviously dependent on what happens with crude oil prices and it’s very volatile.”

The average price of home heating oil per 1,000 litres has increased by 49% in the past year, from £466 in February 2021 to £696 in February 2022, according to the Office for National Statistics.

But Mr Buckman says it’s important to look at the long-term trend.

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“What people need to remember is how much they were paying two years ago during the first lockdown where it was 20p a litre and a lot of people enjoyed the savings they made at that time,” he said.

“Now crude oil prices have gone up significantly and we are paying more but the truth is you average it out over a long period of time and it’s quite flat.”

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He said his advice for customers is to compare prices and put a contingency plan in place.

He said: “I would advise people to shop around and check the price with a number of local suppliers. If people want the surety of not running out, definitely don’t leave it to the last minute.

“I would also set up a payment plan and start saving up now so put some small amount of money aside and when the winter comes, you have a bit of a buffer there ready to start placing orders.”

Cutting fuel poverty a ‘major priority’

Unlike gas and electricity, the price of home heating oil isn’t covered by a price cap. Under the Domestic Gas and Electricity (Tariff Cap) Act which came into force in 2018, Ofgem is required to set the maximum price suppliers can charge customers on a standard or default tariff but not those using non-mains gas heating such as LPG or heating oil.

This is said to be due to the fact that these markets have a different dynamic to mainstream utilities. For example, customers can choose from a number of oil suppliers and are not confined by contracts. People can also join oil buying clubs to unlock bulk-buying discounts.

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However, there have been calls for the price cap on energy to be extended to the domestic heating oil market, including a petition to Parliament signed by more than 7,000 people.

A spokesperson for the Department for Business, Energy and Industrial Strategy said: “If consumers are off the gas grid, but on a default tariff for their electricity supply, they will still be protected by the Energy Price Cap.

“In the longer term, improving the energy efficiency of our homes and buildings is vital to keeping household energy costs down and reducing carbon emissions, which is why we are investing £6 billion into making homes more energy efficient over the next ten years.”

A spokesperson from the Northern Ireland Housing Executive said: “Reducing fuel poverty and helping households to manage the costs associated with energy bills is a major priority. As the Home Energy Conservation Authority, we manage 27 Oil Buying Clubs across Northern Ireland with over 2,000 members benefitting from cheaper oil by regular bulk-buying.

“Members can benefit from up to a 20% discount, but recent price hikes and oil shortages are having an effect, particularly on low income households that buy oil more regularly and in lower quantities.

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“We won’t know definitively for some time whether recent increases represent a long term trend or a more immediate challenge. Our staff are monitoring the situation closely and advice and guidance on joining oil buying clubs is available via our website nihe.gov.uk.”