But while crude oil prices have risen sharply, kerosene – the fuel used for domestic heating oil – has increased even faster.
Around 1.7 million UK households rely on heating oil, making price volatility a major issue for rural and off-grid communities.
Conflict involving Iran has sent shockwaves through global energy markets, pushing oil prices higher and disrupting fuel supply chains. While crude oil dominates the headlines, the most dramatic movements are deeper within the refining system – in the kerosene market that determines heating oil prices.
Why kerosene has surged faster than crude
The surge in heating oil prices has fuelled public anger, political accusations and growing industry scrutiny. Yet the reality behind the price spike is far more complex.
Heating oil is kerosene-based – as is jet fuel – meaning its price is driven by global aviation fuel markets rather than the crude oil price.
In a consumer advice note, UKIFDA confirmed that the wholesale price of jet fuel has more than doubled, reaching a three-and-a-half-year peak.
Europe is particularly exposed to supply disruption in this market. In 2025, at least 40% of Europe’s jet fuel imports came from the Middle East via the Strait of Hormuz, which is, at time of writing, effectively closed.
The result has been a rapid rise in wholesale kerosene prices – which feeds directly into the price distributors pay for heating oil.
Working with price volatility
The exceptional volatility of wholesale price movements has created major operational challenges for distributors.
Prices have been moving multiple times within a single day, making it extremely difficult for distributors to quote customers for deliveries scheduled several days in advance.
Companies we have spoken with have explained how they have honoured prices on existing orders – even though that meant making losses on some deliveries.
Much of the tension between customers and distributors stems from a misunderstanding about how fuel supply works.
In reality, most distributors have little or no storage with many holding no more than two days’ supply. Any fuel stored is working stock that must be continually replaced at current wholesale market prices.
That is a world away from the public perception of large, well-hedged utilities sitting on cheap stock and opportunistically repricing it for gain. Distributors are effectively price takers, largely buying at daily market prices, and are now quoting much closer to delivery because volatility makes forward pricing dangerous and risks supply continuity.
Put simply, distributors have limited stock and likely to have more orders than stock at any given time. Heating oil prices reflect the price the distributor pays on the day they collect it.
Capital challenge
Much of the downstream fuel industry operates using trade credit insurance and supplier credit limits. These limits are typically set based on the value of fuel purchases rather than physical volume.
When wholesale prices rise sharply, the same credit limit buys significantly less fuel.
If wholesale prices double, distributors may be able to purchase only half the volume of fuel within existing credit limits, potentially tightening supply further unless revised credit terms are secured.
What it means for customers
For households dependent on kerosene, this is an immediate cash-flow shock, not an abstract market event. With customers having to absorb the full increase at point or order, the rapid rise in heating oil prices has also become a political flashpoint.
Chancellor Rachel Reeves has warned companies not to exploit the crisis, while Conservative leader Kemi Badenoch has called on the Competition and Markets Authority (CMA) to investigate the heating oil market.
Ministers in Ireland have also spoken in inflammatory terms of ‘possible price gouging’ and the issue has quickly become part of the wider cost-of-living debate.
All of which may generate political mileage, but without a full understanding of the facts, it also risks flattening a complex market failure into unjustified finger pointing.
Government message
Alongside the political criticism, ministers have also acknowledged the essential role played by distributors.
In a joint letter to industry body UKIFDA, Energy Secretary Ed Miliband and Energy Minister Michael Shanks thanked the sector for the work it does supplying off-grid households.
However, the letter also emphasised the importance of maintaining consumer trust – a point reinforced by UKIFDA’s response which indicated support for the CMA’s approach, and confirmed that “Despite the very large price swings and demand, distributors are honouring orders as quickly as they can.”
A sector caught between geopolitics and perception
The current heating oil price spike illustrates how quickly global geopolitical events can ripple through local energy markets. The crisis is not simply about the price of crude. It is about the jet fuel market, supply-chain disruption and market structure.
The fuel distribution community is being squeezed from both sides. Customers are frightened and angry. Distributors are being asked to absorb global volatility they did not create. And politicians, sensing a live cost-of-living issue in rural communities, are turning up the heat. The danger is that in the scramble for culprits, the industry’s actual role, and the real mechanics of the market, get lost.
The challenge now is to protect customers, preserve supply and keep the public debate anchored in how heating oil pricing really works.
It is equally important not to confuse operational triage in a broken market with excess profit. Far from benefiting from the volatility, distributors are trying to avoid being swamped by it while keeping customers supplied from a market priced day by day.
As scrutiny of the sector intensifies, ensuring that the public debate reflects the operational realities of the heating oil markets may prove just as important as managing the volatility itself.
The full analysis – including distributor perspectives, Northern Ireland’s exposure to heating oil volatility and lessons from previous fuel market crises will appear in the April issue of Fuel Oil News.
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