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Heating oil for domestic homes

Learn about home heating oil for domestic energy and get tips on how households using this form of fuel can cut their energy bills.

Key points

  • Heating oil is typically more expensive and inefficient than mains gas, but may be the right heating option for those off the gas network
  • Kerosene should be cheaper and more efficient than gas oil
  • Heating oil customers can still shop around for electricity as a way of cutting energy bills
  • There are a number of ways to cut the cost of heating oil, including shopping around, haggling, collective buying and getting the timing of a purchase right

There are an estimated 1.5 million households using heating oil to keep their homes warm in the UK, a figure that emphasises how important this fuel is to the country's domestic energy market.

Most domestic oil is used in boilers, but some households may also require such fuel for fires and cookers. Just like gas, it's controllable and there on demand when needed.

Heating oil contains more carbon and emits more emissions per unit of heat delivered than gas, but when compared to coal is much 'cleaner' and more efficient in these areas.

Oil is of particular relevance and importance in specific areas of the country where households aren't connected to the main gas network.

Such regions would include parts of rural Wales and Scotland, while heating oil is the most common fuel for home heating in Northern Ireland; the late development of a natural gas network there means that about 68% of households in Northern Ireland use domestic heating oil.

Money saving for heating oil customers

Heating oil customers need to ensure they keep their own oil tank topped up to ensure they have a heating source, and shopping around for the right price isn't as easy for them as for householders whose heating comes from the gas network.

However, there are ways for such people to save on their energy bills.

Perhaps the first and most obvious point to note is that heating oil customers should still be able to shop around for electricity, comparing tariffs and suppliers to find the right deal.

Saving money on heating bills may require a bit more thought, but here are some things to think about…

Can oil customers change their heating source?

If a heating oil household is connected to the main gas network then switching to a gas boiler and heating system should be a relatively straightforward - if initially expensive - exercise.

Mains gas should be a cheaper fuel source than oil, it should make shopping around for energy more straightforward and it's possible that switching to a gas boiler could even add to the value of a property.

Households that are off the gas network may potentially have most to gain from creating their own solar, wind and hydro power

If, on the other hand, the home isn't connected to mains gas, it may well be that oil is the cheapest heating option available, but there are other options to consider…

For a start, it's worth noting that there are two main types of heating oil, kerosene and gas oil; kerosene is cheaper, more common and efficient, meaning switching to a kerosene boiler from a gas oil one may be worth considering.

Electrical heating is also worth thinking about; it's not necessarily a cheaper option, but it may be more convenient and easier to budget and shop around for. Electric may also prove to be a better long-term option with the rise of time-of-use tariffs, feed-in tariffs and smart meters.

Feed-in tariffs are connected with the growth of renewable energy being created by domestic customers; while initial set-up costs for such energy generation can be expensive, households that are off the gas network may potentially have the most to gain from things like their own solar, wind and hydro power.

If such options seem to point to the future, more traditional alternatives to oil include coal-fired boilers, liquid petroleum gas (LPG - bottled gas) and biomass boilers (fuelled by wood). These are typically thought to share most of the downsides of oil-fired boilers, but may also prove more inconvenient and expensive. Home emergency cover

Cutting the cost of heating oil

If oil is your heating source of choice - or you have no other options - you need to be aware that there's no regulator to look after this market, although some suppliers subscribe to a code of practice laid down by the Federation of Petroleum Suppliers (FPS).

Amongst other things, this asks members to resolve incorrect deliveries, explain payment options and charges, and to guarantee unit costs once agreed.

The FPS has its own ombudsman, but it's also important to remember that the institution is a trade body rather than a government-backed regulator, and for the customer it's still very much a case of caveat emptor ('let the buyer beware').

Do look for an FPS-backed supplier, but also consider these methods to try to keep the costs down.

Shop around for heating oil

We're sure you were expecting the old 'shopping around' nugget from us! Gocompare.com DOES NOT currently offer a comparison service for heating oil, but a quick online search should give you options.

The comparison market for heating oil isn't as advanced as for gas and electricity, meaning you may have to do a little more of the work yourself.

Heating oil theft

One problem of buying in bulk is the tempting target that your brim-full heating oil tank becomes to potential thieves, who may have room for manoeuvre in rural areas.

Security measures to consider on your property include strong, locked gates, CCTV and floodlighting. On the oil tank itself, think about a lockable cap, hardened casings for hoses, and devices to electronically monitor oil levels, which could be connected to an alarm.

Oil theft is also an area worth thinking about when you arrange your home insurance; read your policy with care and, if in doubt, speak to your insurer.

There are some comparison sites, you could also try a broker, or go direct to the oil companies themselves; as usual when shopping around, the more choices you give yourself, and the more knowledge you build, the better.

Don't assume the price is set

If you're looking for a general rule of thumb for heating oil price, it's been suggested that paying around 4p a litre more than the wholesale price of the oil may be a reasonable deal; the Gov.UK website publishes quarterly energy prices.

Remember, though, that haggling is almost always an option when you're shopping around, and the very nature of the unregulated heating oil market may make it particularly conducive to a bit of price-wrangling.

The more you order in one go, the stronger your bargaining position, a factor that's led to the rise of community purchasing.

As collective switching has had a big impact on the gas and electricity market, so when it comes to heating oil there have been various heating oil clubs - composed of groups of neighbours, villages and other communities - that have clubbed together to bulk-buy.

As well as the scale of the purchase, suppliers can benefit by having to arrange fewer visits by oil tankers, meaning that significant discounts can be secured by buyers.

Timing is crucial

Another general rule of thumb to think about is that buying oil in summer is typically when it's at its cheapest, and midwinter is when it's most expensive.

Such a rule cannot, of course, be guaranteed as prices can change at any time, but it may be worth trying to top up in summer, while remembering that bulk-buying can secure a discount. How to make your credit card work harder for you

This could mean that it's advantageous to buy when your oil tank is close to empty… but leave it too late and you may have to pay a surcharge for an emergency delivery.

Think about how you pay

Each oil order is likely to be a significant purchase, so try to pay for it in the way that works to your best advantage.

If you have the discipline to pay off the balance in full every month, it may be worth thinking about using a cashback credit card; as well as offering certain levels of consumer protection, this will allow you to claw back a proportion of your outlay when the cashback bonus is applied.

By Sean Davies