The economic fallout from the war in Iran threatens to leave some Americans in the literal cold this year. That’s because of the high cost of heating oil, which residents of the Northeast rely on to keep their homes warm in the winter months.
In January, a gallon of heating oil cost $3.58 on average. By March, the average was over $5 per gallon, according to data from the Federal Reserve Bank of St. Louis.
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A report from the National Energy Assistance Directors Association forecasts that households that rely on heating oil will spend $2,279 to keep their homes warm through the 2026-27 winter. That’s $548 more than last winter — a 31% increase.
In the states that rely most heavily on heating oil, the prices have risen even higher. The latest average price in New York is $6.27 per gallon, according to data from the New York State Energy Research and Development Authority. That’s a 70% increase compared with a year earlier. And the sky-high prices are coming just as colder weather blows in.
“Ideally families buy their heating oil in the summer when the price is lowest,” said Katrina Metzler, executive director of the National Energy and Utility Affordability Coalition.
But many households do not have that luxury to plan ahead, Metzler told Straight Arrow. And since prices have been high all summer, some may have hoped the market disruptions driving up costs would subside by fall. That’s turned out not to be the case, leaving the 4.8 million Americans who rely on heating oil in a difficult financial situation, as they look to buy enough fuel to make it through the winter.
What’s causing prices to spike?
“Heating oil is nearly identical to diesel fuel, so its price moves with the global diesel market,” said Jim Collura, president and CEO of the National Energy and Fuels Institute, a trade organization for heating oil companies and other fuel products.
Diesel prices have hit a record-high this week, with Friday’s national average above $6.50 per gallon, according to AAA.
The main driver behind the spiking prices is the price of oil, which is currently over $106 per barrel for the international benchmark Brent. But that’s not the whole story for diesel and heating oil.
Because liquid fuels can be shipped and sold across the globe, Collura told Straight Arrow, “a disruption anywhere pulls barrels from everywhere.”
And the war in Iran has done more than choke off oil supplies from flowing through the Strait of Hormuz. There have been attacks on major oil refineries in the Middle East. Ukraine has also stepped up attacks on Russia’s oil refineries.
READ MORE: Six months into war with Iran, refinery bottlenecks keep gas prices high
Effectively, the global market has less capacity to convert the crude oil into fuels like gasoline, diesel and heating oil. In the U.S., refineries have been operating at around 97% of their total production capacity for the past two months, according to the U.S. Energy Information Administration.
In the Northeast, fuel in storage is approaching record lows. Collura said that’s because “fuel is worth more today than it is expected to be in a few months, which discourages suppliers from holding inventory.”
How does this affect low income people?
Parts of the Northeast are expecting overnight low temperatures in the 40s during the first week of October. By this time of year, anyone who hasn’t already bought heating oil typically looks to stock up.
“Prices are climbing and demand drives those prices up even more,” Metzler said. “The last thing that we want is for anyone to be in a dangerous situation inside their own home.”
The federal Low Income Home Energy Assistance Program distributes money to states, which is then disbursed to families with demonstrated financial need for home energy assistance.
The program has been funded for the 2027 fiscal year, with money available starting Oct. 1. State applications open in early October or November. However, this year the program will have $100 million less to distribute because supplemental funds through the 2021 Infrastructure Investment and Jobs Act expired.
While heating oil prices are significantly higher than last year, Metzler said, “the likelihood that people will receive increases to LIHEAP are very slim.”
That could be a problem for low-income residents, particularly people on fixed incomes who plan their budgets around the release of LIHEAP funds.
Heidi O’Donnell, a former fashion designer living in upstate New York, has relied on LIHEAP for nearly a decade.
Last year, O’Donnell told Straight Arrow about her experience when the program’s funding was in limbo during a government shutdown. The money was eventually released and she was able to buy the heating oil she needed.
This year, O’Donnell told Straight Arrow she is conserving what little oil she has leftover, waiting for the LIHEAP application to open in November. That means taking quicker and fewer showers, washing dishes in cold water, and thanks to a space heater, O’Donnell said she can avoid turning on the heat until temperatures dip into the 30s.
But O’Donnell said she’s “very worried right now.” She sees that prices for oil are higher and expects “the amounts of grants won’t change. So I’m thinking I won’t be able to get a whole tank to start winter with.”
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