OLR Report 2012-R-0249 explains what determines the price of home heating oil and why its price closely tracks that of diesel fuel when there are additives in diesel fuel and the two fuels are subject to different taxes.
The primary determinant of the price of both home heating oil and diesel fuel is the price of crude oil. Nationally, the Energy Information Administration (EIA), part of the U.S. Department of Energy, estimates that the cost of crude oil accounts for 63% of the retail price of home heating oil. The other components are refining costs (13%), distribution and marketing costs (12%), and taxes (12%). For diesel fuel, the cost of crude oil accounts for 61% of the retail price. The other components are refining costs (11%), distribution and marketing costs (16%), and taxes (12%). These proportions vary geographically.
The retail price of home heating oil closely tracks that of diesel fuel. Table 1 compares the average retail prices of the two products in New England from October 2011 through March 2012 using EIA data (Connecticut data are not readily available). During the past heating season, diesel fuel was consistently more expensive than home heating oil, but the difference was less than 5%, ranging from 6.2¢ to 16.9¢ per gallon.
For more information, including a table comparing diesel and home heating oil prices across New England, read the full report.
