Diesel fuel and heating oil are classified as distillate fuel oils and rank second behind gasoline as the most-consumed liquid fuels. Diesel fuel powers heavy construction equipment, trucks, buses, tractors, trains and automobiles. Heating oil (often referred to as No. 2 fuel oil) is used in the central heating of homes and small buildings.
Three-quarters of diesel fuel sales are used primarily for transportation. A little over 10 percent of distillate sales are for residential heating purposes, concentrated during the winter months. Although total distillate use has been rising over the last decade, all the growth has come from increased use of diesel for transportation uses.
Residences and businesses use about 10 billion gallons of heating oil each year, with an average single-family home consuming about 730 gallons of fuel each winter. Obviously the severity of winter weather has a significant impact on demand. In addition, some large, energy-consuming industries such as electric utilities have contractual arrangements with their natural gas suppliers that require them to switch to distillates during periods of peak natural gas demand. This ensures adequate supplies for residential natural gas consumers, but puts an extra load on heating oil demand.
Prices of both heating oil and diesel have increased over the last several years, although recently they have not risen as sharply as gasoline prices. Distillate prices are impacted by rising crude oil costs, but supplies have not been as tight as those experienced in the gasoline market.
Advantages Distillate fuel, which require less processing to produce than gasoline, has traditionally cost less than gasoline except in periods of tight supply. In addition, engines fueled by diesel have long been recognized for their durability, although lacking some of the performance attributes of gasoline-powered engines. Like gasoline, all forms of distillates can be transported safely and economically through the nation’s extensive distribution system of underground pipelines, terminals and tank trucks.
Issues As products refined from oil, diesel and heating oil share the same refinery-related environmental and safety issues that accompany gasoline production. (See Gasoline) In addition, major steps have been taken since 1993 to significantly reduce the sulfur content of diesel fuels designated for on-highway use. In 2006 refineries were required to provide Ultra Low Sulfur Diesel containing no more than 15 parts per million at the retail level. Likewise, the sulfur content of diesel for off-road applications including trains, ships and construction equipment is scheduled to be cut back over the next few years. These steps are expected to have a major impact on sulfur dioxide emissions stemming from diesel-powered sources.
For More Information
Heating Oil Supply and Demand, a brief summary of the factors that propel prices prepared by the American Petroleum Institute (API).
Residential Heating Oil Prices: What Consumers Should Know, a brief overview of heating oil basics prepared by the U.S. Department of Energy.
Northeast Heating Oil Reserve, a U.S. Department of Energy status report on the federally created heating oil reserve established in 2000.
How Oil Refining Works, a Web site presented by HowStuffWorks that summarizes the processes involved in manufacturing crude oil into gasoline.
Winter Fuels Update, a recap of the prices and supply conditions in the propane and heating oil markets, compiled by the U.S. Energy Information Administration.
This Week in Petroleum, a weekly overview of factors influencing the price and supply of gasoline, diesel (distillates), propane and crude oil, compiled by the U.S. Energy Information Administration.
Short Term Energy Outlook, the latest report by the U.S. Energy Information Administration outlines the federal government's price and supply predictions for gasoline, natural gas, heating oil and other fuels.