Residential heating oil is also referred to as fuel oil. It is a middle distillate petroleum product and is similar to jet fuel and kerosene. In the past few years, fuel oil and diesel were considered to be identical. The same refined petroleum product was procured andsold through gas stations as highway fuel and as heating oil by dealers.In the present scenario, residential heating oil is considered to be different from highway fuel for two main reasons: firstly, in 1990s, the U.S. Environmental Protection Agency (EPA)has passed a regulation that diesel oil used for transportation purpose should have a sulfur content of less than 500 parts per million. However,for heating oil, sulfur content was kept in the range of 2,000 ppm to 2,500 ppm. Further,the highway fuels are taxed on per unit price by both federal and state governments, in order to raise revenue and to provide funding for highway trust funds. Since heating oil is not taxed on the same lines as that of highway fuel, it is dyed in cranberry red color to differentiate it from highway fuel.
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The heating oil industry has a vast experience of supplying heating products and services especially in the United States. In 1940s, oil acted as a substitute for replacing coal as primary heating source in the U.S. As compared to coal, oil was less expensive, cleaner and highly efficient. For these evident reasons, it has been widely utilized in the United States and throughout the world. Majority of the companies that were in the business of selling coal and ice, starting becoming retailers of heating oil and eventually the industry started growing at a healthy rate.Huge proportion of these oil businesses were family-owned and have been in existence over the years. Due to this characteristic, the heating oil industry occupied a unique position in the U.S. market.While reducing the sulfur content in highway diesel, a slight impact was made on the sulfur content in heating oil. As per the designated industry standards 5,000 ppm was considered as the top line for sulfur in heating oil.
The average stocks for heating oil tend to lie in the range of 2,000 ppm to 2,500 ppm. This is majorly due to the spillover effect from refining of highway dieselas refineries manufacture heating fuel and transportation diesel by the same processes. The sulfur content in oil, then primarily depends on the place where the process was carried out.In the present scenario, refineries produce low sulfur diesel fuel that meets all the parameters laid down by Environment Protection Agencyespecially for transportation usage. Since heating oil and diesel is essentially the same product, dealers are taking the advantages of selling the low sulfur fuel as heating oil. Currently, heating oil must contain less than 0.5 percent sulfur to comply with ASTM standards. However, the difference in price of oil and low sulfur oil is considered to be very less. Ifdemandfor low sulfur fuel oil increasesat a healthy rate the price differential should be reduced to zero. The analysis carried out by regulating authorities compares low sulfur heating oil and traditional heating oil in many areas such asquantity of residue deposited,air pollutant emissions, estimated environmental impactsand costs associated with equipment maintenance.
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Stringent environmental rules and regulations and strict government norms of various countries are some of the key drivers of the low sulfur fuel oil market. However, less knowledge among people regarding low sulfurfuel oil can hamper the growth of the market in the near future. Advancements in technology bring new opportunities for low sulfur fuel oil market.
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