Refining petroleum or crude oil produces heating oil. Residential use for heating accounts for most heating oil consumption; close to 8 percent of American homes use heating oil.

Like gasoline and diesel prices, heating oil prices depend to a large extent on the supply and price of crude oil. If there is too much crude oil available in the marketplace, oil prices, including heating oil prices, fall. A crude oil supply shortage, alone or combined with increased demand for crude oil products, drives heating oil prices up. Local market factors also affect the price of heating oil. If a heating oil supplier sets its prices too high, consumers may switch to another supplier. When enough revenues are lost from customers who leave, the supplier will be under pressure bring prices more in line with those offered by competitors.

Heating oil prices tend to go up seasonally, with prices being highest during the winter. This is because consumption of heating oil rises as it becomes colder. Extremely harsh weather conditions may also have an adverse impact on supply routes. Thus, if a part of the country experiences an unusually mild winter, heating oil prices may be reasonable. However, if winter is harsh, prices can rise quite dramatically. Another reason for higher heating oil costs is the high cost of transportation to more remote homes.

Many oil suppliers offer fixed price schemes to help consumers control the costs of using heating oil. Installing better insulation can also keep heating costs down. For lower-income families, there are some federal, state and supplier-supported programs to make heating oil more affordable. Some consumers try and avoid seasonal increases in heating oil prices by filling their tanks during the summer months, when prices are lower.