Heating Oil Production in the U.S.

Oil is a major commodity in the U.S. – a primary source of heating for millions of homes. The specific product used for heating homes, heating oil, is actually refined from its base – crude oil. For the most part, the country gets its heating oil from two known sources. The first one is from domestic oil refineries while the second is through imports from other countries. The former is a product of decades of struggle and perseverance by the government to finally have the country’s own oil reserves, realizing that in the not-so-distant future, the need for heating oil will increase exponentially.

Through refineries, heating oil is produced in the distillate fuel category of general petroleum products. If the term “distillate” isn’t familiar to you, just think about diesel fuel. Today, a huge chunk (majority) of the demand for U.S. distillate is being met by homegrown refineries. This is a remarkable development considering that the country wasn’t really one of the biggest producers of oil in the past several decades.

On the other hand, imported heating oil is still very much valuable in a country that already have tons of reserves. The reason for this is because imports are the ones that provide sufficient supply to homes in the U.S. during the winter months. If you happen to be living in the northeast, then it’s more likely that you’re using imported heating oil.

The distillate products that come from petroleum products, including heating oil are distributed and moved all throughout the U.S. by way of previously built and laid out pipelines, trains, bargers, trucks, and tankers.

But it’s also worthy to know that refiners actually have limitations in terms of the amount of heating oil they will be commissioned to produce for the purpose of meeting the demand in the country during the heating season. In other words, they can increase the production of heating oil in the winter, but in the process, they will be compelled to produce an increased amount of other petroleum products, too. But because the market for larger amounts or volumes of petroleum products just isn’t that big, it means the demand won’t be big either. As a result, refiners have no choice but to limit the amount of heating oil they produce, notwithstanding the demand from homeowners and business owners during the heating season.

One solution heating oil companies have come up with is they will be producing heating oil in the summer as well as the autumn months and store it for delivery for the winter season. Therefore, when the cold season arrives, they have enough in their inventory to sell to consumers. And the best thing about it is that they can sell the oil at a high price since the demand is very high.

Today, even though there is progress on the frequency of domestic oil production, the U.S. remains to import the same commodity from countries like Canada and Russia, most of which are consumed in return in the East Coast.