The funding – around £53 million in total – will be distributed across the UK, with £27 million allocated to England, £17 million to Northern Ireland, £4.6 million to Scotland and £3.8 million to Wales.
The announcement follows a sharp increase in heating oil prices linked to disruption in global oil markets, with kerosene prices rising significantly faster than crude. Around 1.7 million UK households rely on heating oil, the majority located in rural areas and off the gas grid.
Lower level of support
While the move has been broadly welcomed as recognition of the pressures facing off-grid households, the scale of the support is significantly lower than previous interventions.
If spread across the UK’s oil-heated homes, the package would equate to roughly £30 per household. That compares with the £200 Alternative Fuel Payment introduced during the energy crisis following Russia’s invasion of Ukraine.
The contrast has already prompted questions about whether the latest support will provide meaningful relief given the scale of recent price increases.
Questions over delivery
The Government has indicated that local authorities in England will distribute the funding, likely through existing hardship or welfare support schemes.
In Scotland, Wales and Northern Ireland the funding will be passed to devolved administrations, which will determine how the support is delivered.
In Northern Ireland the announcement has been less warmly received with Finance Minister John O’Dowd suggesting the £17.2m allocation from Westminster is “disappointing and falls far short of what is needed”. With over 480,600 homes in the region relying on home heating oil, the minister said those people will be “genuinely shocked and disappointed at how limited that support is.”
Northern Ireland’s First Minister, Michelle O’Neill, went further in her criticism, branding the support package a “slap in the face” that “doesn’t scratch the surface” of the region’s needs.
While the government has suggested the support will go to “the most vulnerable”, key details remain unclear, including:
- Which households will qualify
- Whether payments will be automatic
- How funding will be targeted at those most affected
This lack of clarity has raised concerns that the funding could be spread too widely, limiting its impact on the most vulnerable off-grid households.
Charities warn of continued pressure
Charities representing vulnerable households have welcomed the announcement, but warned that further support may still be needed.
Joanna Elson CBE, Chief Executive of Independent Age, said older households on low incomes remain particularly exposed to heating oil price volatility:
“Older people on low incomes who use oil to heat their homes will welcome today’s news that support is coming, however the situation remains very concerning.
With the price of oil skyrocketing over recent weeks, predicting the cost has become an additional budgeting nightmare for older people on a low income who have very little flexibility to make their budget stretch.
“While the UK Government’s announcement of support is good news, the scale of need for people who use oil for their heating, and for wider households relying on uncapped fuels, is significant. We urge the UK Government to keep prices under constant review and be prepared to step in with greater support if needed. Older people on low incomes must not be left in the cold.”
An industry working with government
Fuel distributors say the recent spike in heating oil prices has created significant operational and customer communication challenges, with volatility making it increasingly difficult to provide forward price certainty, leaving customers confused by rapidly changing prices.
Responding to the Government’s announcement, the UK and Ireland Fuel Distributors Association (UKIFDA) said it had already been engaging with government as market volatility intensified.
The association confirmed it contacted the Energy Minister’s office on 6 March to outline concerns about the impact of rising prices on customers, distribution businesses and employees following the escalation of conflict in the Middle East.
In a statement, UKIFDA said it welcomed the announcement and would work with officials to help ensure customers receive clear information about any support available.
UKIFDA also stressed the importance of recognising the structure of the heating oil market.
“The fuel distribution industry differs significantly from other energy markets. It is made up of a large number of companies, many of them small, family-run businesses. This structure creates strong, healthy competition.”
The association warned that any regulatory response should avoid undermining that competitive structure, which it says ultimately benefits consumers.
Pricing challenge
The latest support package represents a further acknowledgement by government that households relying on heating oil remain particularly exposed to sudden energy market shocks.
As UKIFDA explains: “Heating oil is supplied very differently from gas and electricity, which helps explain why prices can move quickly either up or down. Instead of a few national suppliers, the market is made up of many local, often family‑owned distributors operating with limited storage and buying fuel at the daily market price.
“This creates strong competition and, in normal times, helps keep prices lower. After the 2022 period of global market disruption, heating oil prices returned to average levels far more quickly than those of many other commodities.
“There are no long‑term contracts, so oil‑heated households can shop around. However, this also means distributors cannot predict demand in the same way as gas and electricity companies. When demand rises suddenly or wholesale prices shift, delivery times and pricing can be affected.
“Most distributors have little or no storage. Many hold no more than two days’ supply. Therefore, they collect fuel from refineries or terminals at the market price almost daily. In effect, they are price takers.”
The crisis in the Middle East has come at a time of year when demand usually falls. Rising prices have driven many households to place orders, creating higher-than-usual demand. This has affected delivery times, and with the ongoing wholesale price volatility, many distributors are now providing prices closer to the delivery date.
An industry ready to help
With geopolitical tensions continuing to influence markets, the key question may not simply be whether support is offered – but whether it can be targeted effectively and delivered quickly enough to households most exposed to fuel price volatility.
Welcoming “any financial assistance that can be offered to customers”, UKIFDA confirms that, as it did in 2022, the industry will “work with the Government to help communicate them clearly to our customers so that as many of them as possible can benefit.”
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