Government Plans Support for Heating Oil Users Amid Price Surge
The government is preparing to introduce measures to assist households affected by a significant increase in heating oil costs.
The price of heating oil has risen sharply following the outbreak of the US-Israeli conflict involving Iran, which has driven crude oil prices above $100 (£75) per barrel, compared to $71 per barrel prior to the conflict.
Chancellor Rachel Reeves informed the Times over the weekend that she had "found the money" to provide assistance.
Prime Minister Sir Keir Starmer is scheduled to present the support package, reportedly valued at £50 million, during a news conference on Monday. He is also expected to address concerns about companies potentially exploiting the crisis through price gouging.
Unlike households that use gas and electricity for heating and hot water, those relying on heating oil are not protected by price caps set by the regulator Ofgem.
Consequently, heating oil users have been among the first to experience the impact of rising crude oil prices, with some customers reporting their costs have doubled.
Heating Oil Usage and Regional Impact
The issue is particularly severe in Northern Ireland, where approximately 500,000 homes use heating oil, representing nearly two-thirds of all households.
In England and Wales, about 3% of households reported oil as their sole source of central heating according to the 2021 census, while in Scotland the figure is 5%.
Concerns Over Price Gouging and Regulatory Response
Last week, Chancellor Reeves accused some heating oil companies of exploiting the Middle East crisis to overcharge consumers and requested the Competition and Markets Authority (CMA) to investigate.
In response, the UK and Ireland Fuel Distributors Association, representing heating oil suppliers, stated that its members have experienced "a very large and unexpected increase in demand." They added, "We have spoken to many distributors who, despite the very large price swings and demand, are honouring orders as quickly as they can. We know that the CMA is monitoring this, and we support this approach."
On Saturday, CMA Chief Executive Sarah Cardel announced that the authority is urgently investigating the situation and will "not hesitate to take enforcement action if potential breaches are identified."
Sir Keir is expected to express concerns on Monday regarding reports of cancelled orders and inflated prices.
If the companies have broken the law, there will be legal action,
he is anticipated to state.
Crude Oil Price Trends and Global Factors
Last week, crude oil prices reached nearly $120 per barrel before declining slightly. On Friday, prices closed near $104 per barrel, still significantly higher than pre-conflict levels.
The price surge is largely attributed to the effective closure of the Strait of Hormuz, a critical maritime route that transports one-fifth of global oil supplies.
Energy Price Caps and Future Outlook
Currently, household gas and electricity bills in England, Wales, and Scotland are protected by an energy price cap set by Ofgem. Under this cap, bills are expected to decrease in April.
However, developments in the wholesale energy market between now and late May will influence household bills from July onwards. A prolonged period of high wholesale costs could result in significant increases in energy prices for millions of consumers.
During the previous price spike following the Covid-19 pandemic and Russia's invasion of Ukraine, the government intervened with the Energy Price Guarantee.
Government and Opposition Responses
Energy Secretary Ed Miliband told the BBC's Sunday with Laura Kuenssberg programme that "if it's necessary to intervene, we will" regarding energy bills, but noted that any intervention would depend on the conflict's impact scale.
Shadow Energy Security Secretary Claire Coutinho, speaking on the same programme, urged the government to implement the "cheap power plan" proposed by the Conservatives last year to immediately reduce bills.
The first port of call should be to reduce costs to people's energy bills, before we go to the taxpayer again,
Coutinho said.
