Refiners are limited in the amount of heating oil they can make to meet the demands of the winter heating season. Some winter heating oil is produced by refineries in the summer and fall months and stored for winter use. During the coldest winter months, the inventories that are built in summer and fall are used to help meet the high demand. Refiners can increase heating oil production in the winter to a modest degree, but they quickly reach a point where, to produce more heating oil, they would also have to produce more of other petroleum products which could not be sold in sufficient quantities during the winter months. On the other hand, if consumer demand is high for a seasonal product, such as gasoline, refiners may delay producing heating oil for the winter, which may lower inventories at the start of the heating season.
Heating oil is brought into oil storage terminals in an area by refiners and other suppliers.
For example, heating oil may be delivered to a central distribution area, such as New York Harbor, where it is then redistributed by barge to other consuming areas, such as New England. Once heating oil is in the consuming area, it is redistributed by truck, to smaller storage tanks closer to a retail dealer's customers, or directly to residential customers. In 1999, crude oil accounted for approximately 48 percent of the cost of a gallon of heating oil. Heating oil prices paid by consumers can vary over time and by where a consumer lives. Prices can change for a variety of reasons.