April Oil report – The popularity of Heating Oil in the UK
The roots of liquid Fuel Distribution in the UK started in the Second World War when both the Coal and Electricity industries were nationalised. This nationalisation effectively meant that both the buying and selling of coal was controlled by the Government, leading to independently minded coal merchants looking at other forms of energy. At around the same time, the Oil Majors were on the look-out for wider distribution channels, particularly for their Fuel Oil production, which was then seen as a waste bi-product of refining gasoline.
The realisation that Fuel Oil could be sold to a new breed of energy seller stimulated a whole new industry. Firstly Fuel Oil eclipsed coal for the fueling of ships and then soon after that, diesel and electric trains had replaced coal-reliant steam locomotion. It was the “dash for gas” which killed off coal for home heating and demolished the number of nationwide coal sellers, however, gas was only available in urban areas and so thousands of rural properties were unable to connect directly to the Gas Main. Once again, all eyes were on the Fuel Distributors, with their new, fangled Kerosene Heating Oil…
Fast forward to the current day and it is this same product that forms the backbone of most Fuel Distributor operations, as they supply over 3 billion litres of Heating Kerosene to almost 2 million UK households. Kerosene has changed very little since the 1970’s and is actually Jet Fuel, but with a lower Sulphur content, 1% Sulphur for Heating Oil vs 3% Sulphur for Aviation. It is also still supplied to those properties that are “off-grid” and cannot therefore, use Natural Gas.
For the businesses like Rix Petroleum, selling Kerosene remains a maddeningly seasonal affair with cold winters generating up to 50% spikes in monthly demand. Unlike the rest of Europe and North America, who use Gasoil for Heating Oil, Britain is unique in using Kerosene for heating, which makes this grade a niche product and therefore potentially tricky to source. At 3 billion litres per annum, Heating Kerosene only makes up 20% of the total Kerosene market in the UK, with the bulk of the volume (13 billion litres) being Aviation Kerosene. The Heating Oil sector is reliant on refiners to keep producing the more expensive, low sulphur Heating Kerosene when it would be considerably easier just to sell Jet Fuel. This position is made even more precarious when you consider that 60% of Jet Fuel consumed in the UK is imported, meaning that there is unlimited demand for UK produced Aviation Kerosene.
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