Commodity Investing: Maximizing Returns through Fundamental Analysis

CHAPTER 5

Heating Oil

Heating oil is one of the many products produced from refining crude oil. It is classified as a distillate along with diesel, jet fuel, and kerosene. All of the distillates have a similar chemical make-up, and in some areas heating oil is the same product as diesel fuel with the exception of a few additives. Heating oil goes by many names in the United States, including No. 2 fuel oil, distillate fuel, and home heating oil. Outside of the United States it is called gas oil.

Heating oil is used primarily in the northeastern United States to heat both residential homes and commercial buildings. The Energy Information Administration (EIA) reports that in 2001, approximately 7.5 percent of residential houses in the United States used heating oil as their main heating fuel. Approximately 78 percent of these houses are located in the northeastern United States.¹ It is transported by tank trucks to homes and buildings and held in storage tanks that are usually located above ground in basements but can also be below ground. The oil is burned in a boiler or furnace to generate heat for the building. Other regions of the United States typically use natural gas as a heating source, because it has historically been cheaper and the infrastructure is in place in those areas to take the natural gas directly to the homes and commercial buildings. Older homes in the Northeast generally do not have this natural gas infrastructure in place.

Heating oil is very safe to use for ...