The Iran conflict has sent shockwaves through the energy market, pushing oil and gas prices higher.
While most households are protected from large energy bill rises for now by Ofgem’s price cap or fixed tariffs, there’s one group that isn’t – the 1.7million people who heat their home with heating oil.
These households, mostly in rural areas, aren’t connected to the gas grid and instead use oil to fuel their boiler. To do this, they must bulk order kerosene which is delivered to a tank on their property.
But prices have seen huge spikes since the start of the war, with some customers facing a near tripling of their usual bill.
In some cases, customers have had their orders cancelled before being offered a new quote at a higher price.
How much are prices rising, are there any protections for customers and will the Government step in? We answer some common questions.
Off-grid: Rural households often have boilers powered by kerosene oil, which is delivered to a tank like this one
Why are prices rising?
Oil and gas prices have soared in the nearly two weeks since the start of the conflict, following disruption to a key shipping route.
The Strait of Hormuz has seen traffic plunge more than 80 per cent, pushing Brent Crude prices above $100 a barrel and leading to a surge in jet fuel prices to a record high.
Rural communities which rely on oil to heat their homes are being hit by the disruption, which is reaching ‘extreme levels’, according to Rural Action Derbyshire, a charity that runs an oil-buying scheme.
The heating oil market is closely connected to the daily market for jet fuel, meaning any price rises are typically passed on to customers directly.
How much are prices rising?
This can be as much as 10p per litre every day, according to the Fuel Distribution Association.
Costs have moved from 61p a litre before the conflict, to around £1.50 on Friday afternoon.
RAD says homes in Derbyshire that rely on heating oil saw the cost of 500 litres jump from around £300 to £700-800 in the week after the conflict, with some suppliers unable to provide customers with price quotes at all.
For an average household, 500 litres would last two to three months.
With tight supply, some suppliers are reportedly offering small boxes for £3.15 a litre, around five times the usual bulk delivery price.
What to do if your order is cancelled
The price fluctuations mean some customers are having their heating oil orders cancelled, or are being quoted a new, higher price.
More concerningly, some suppliers are warning that these price quotes are indicative and the price could change again on the day of delivery.
While some households might have some luck shopping around for a different supplier, there is likely to be little meaningful difference.
The market moves daily, and most distributors have little or no storage, meaning they can’t bulk-buy oil and sell it later on.
Some households are having to preserve the oil they currently have, with some reporting they are not using it at all. Households running low may need to suck up the higher prices at smaller quantities, but for now, there is limited help for those who rely on heating oil.
RAD urges homes not to panic buy. ‘The price will go back down, so if you don’t need it now, sit tight and wait for the price drop.’
Price shock: Heating oil customers may have to pay triple their usual bill
Is it regulated and who can customers complain to?
The domestic heating oil market is unregulated, leaving rural households vulnerable during price shocks.
Most households are protected by the Ofgem price cap, which will fall next month, or fixed tariffs, but those who rely on heating oil are exposed to daily movements.
Without a regulator, customers have been contacting the Competition and Markets Authority, which is launching an investigation into the market.
Are suppliers price gouging and will the Government step in?
The heating oil industry has faced allegations of profiteering during the crisis, amid growing calls for the Government to step in.
The Prime Minister has said the Government will act ‘if companies hike prices without justification’.
Energy secretary Ed Miliband has written to companies in the industry, warning ‘Government will take all action necessary to protect households,’ while the Chancellor has said she ‘will not tolerate’ firms exploiting the uncertainty.
The pair will meet with energy bosses today to discuss how best to protect consumers, and have promised to intervene if companies engage in ‘unfair practices,’ but there is limited information on what this might look like.