Why Is Heating Oil More Expensive Than Gasoline?

Receiving a heating oil delivery bill that's out of whack with gas prices is a confounding New England winter rite of passage. As of January 5, 2026, the average U.S. wholesale price for a gallon of heating oil was $2.27. The average residential price, however, was $3.64; gasoline was $2.80 at the pump. Both products come from the same crude oil barrels and are subject to the same global market fluctuations. But gasoline incurs additional costs like the 18.30 cents per gallon federal excise tax, plus variable state taxes. And, according to the U.S. Energy Information Association (EIA), gas is more expensive to refine than home heating oil; 18.7% of gasoline's price per gallon is refinement versus 15% for residential home heating oil. All of that suggests gas should probably cost more, yet heating oil is more expensive than gasoline.

The reason for this comes from the basic principle of supply and demand: the less there is of something people want or need, the more it costs. This is compounded by factors like seasonality and regional distribution, acting as the economic culprits behind why heating oil burns a bigger hole in your pocket than petrol at the pump.

A normal U.S. barrel can contain 42 gallons of crude oil. That yields about 20 gallons of gasoline, and 12.5 gallons of distillates – including fuel oil and diesel. (Jet fuel and other assorted products account for the rest of refinement.) Meanwhile, drivers use close to 370 million gallons of gas each day across the country, with some bumps in the warmer months when people are traveling. Simply put, there's more gas being made with constant national demand in mind.

Heating oil doesn't benefit from that nationwide volume and seasonal stability. Home heating oil is very similar to diesel fuel; in fact, they're manufactured at the same time and are similarly priced. But they both come from distillate, and of that limited 12.5 gallons per barrel of crude, roughly 75% of that becomes diesel. The U.S. economy depends heavily on diesel, with 125 million gallons being used daily for trucks, buses, farm equipment, ships, and trains. As such, just a portion of distillate is reserved to heat roughly 4.79 million homes.

Unlike gas and diesel, heating oil has a seasonal usage window. Demand spikes when the temperature drops between October and March. Refiners will produce and stockpile more heating oil in summer and fall for winter use — which is when the price of that oil will usually be at its highest. Limited production, constrained supply, and concentrated seasonal demand equate to higher retail heating oil prices for homeowners.

Heating oil also faces acute, regional demand. According to the EIA, 82% of households using heating oil are located in the Northeast, and transporting oil there from the Gulf Coast or abroad is expensive. Unlike gas, oil has to be trucked directly to homes by local suppliers, and the associated costs can't be spread out beyond the service area. Folks in rural or remote areas can expect to pay higher prices than those in places with greater market competition and supply. Maybe Big Oil wasn't seeing a ton of profits last summer, but if brutally cold temperatures cause demand to increase faster, markets can get anxious and prices can go up.

So, considering all of this, why don't refiners just kick up fuel oil production on the fly? Isn't there just too much money to stop drilling for oil? The catch comes from how increasing heating oil production means decreasing diesel, which can stress the diesel market and impact the fleets that feed the broader economy. Weather that disrupts delivery is a double whammy, as these fleets are often what we rely on to move oil where it needs to go in the first place.

Finally, to make more heating oil, you have to make more of everything else that comes from a barrel of crude. And if there's not enough demand for everything else, there's little incentive for oil companies to go this route. It's an inconvenient profit liability. In 2022, Exxon made $6.3 million every hour; Big Oil isn't really into profit liabilities, even if it can afford them.