What is Heating Oil?
Heating oil is a heavy fuel oil that come directly from the from crude oil product. Heating oil represents about 25% of the yield from a barrel of crude oil. In the early 2000s the price to consumers of home heating oil is generally comprised of 42% for crude oil, 12% for refining costs, and 46% for marketing and distribution costs. Although heating oil prices are also subject to swift supply and demand shifts due to weather changes or refinery shutdowns.
Uses of Heating Oil
The use of heating oil is residential heating. The United States alone has over 8 million households using heating oil as their main heating fuel.
Heating oil demand is most prominent in the Northern Hemisphere from October through March. The North-eastern United States region is most reliant on heating oil. This region consumes approximately 70% of U.S. heating oil.
Risks of Heating Oil
As the demand for this commodity is weather dependent, you firstly need to be very aware of consumer expectation to establish your price, as well as anticipation of overall global weather patterns. An early arrival to winter or blizzard conditions can accelerate market activity.
The other factor to be aware of, is competitive technologies entering the market which could be cheaper and more efficient and thus could slow the consumption of Heating Oil.