Heating Oil and Fuel Poverty

Up until very recently, households were defined as being in fuel poverty if they spent more than 10 per cent of their income on energy in a year. However, following a report “Getting the measure of fuel poverty” by John Hills at the London School of Economics, that was published in 2012, the definition was changed and now households can only be considered to be in fuel poverty if they have an income below the poverty line and have higher than normal energy costs.  However, despite this redefinition, many fuel poverty charities still use the 10 per cent definition.

 

Back in 2012, BoilerJuice asked people via a blog to comment about fuel poverty. Here are some of the comments received which help to give an insight into fuel poverty amongst heating oil users:

 

“I’m currently on benefits and the cost of heating oil in this house is more than my income so I’ve had no heating or hot water for 2 months. I am not eligible for any Government winter/fuel-related help and can’t insulate better because I’m renting and the building is listed so can’t double glaze. “ – Posted by Simon on 2^nd January 2013.

“I live in Knaresborough and this road is still not on gas mains. My last oil delivery cost me £330 and in my rented house (Landlord refusing to service the boiler) it has lasted me 35 days with the heating on for 4 hours in total set on 15 degrees. I cannot afford to get any more for Christmas and my two children are both disabled. Merry Christmas!!!!!” – Posted by Nichola Lewis on 19^th November 2012.

Why heating oil users suffer from fuel poverty in rural areas

The price of heating oil has roughly doubled since 2008 and approximately 56% of rural homes are in the lowest energy efficiency bracket due to older properties with solid wall construction that are harder to insulate. This means householders spend above average amounts on domestic heating oil due to the inefficiency of their home. With an average home consuming between 2000-2500 litres of oil a year and current prices for heating oil at around 60 pence per litre, rural homes may be looking at a minimum of £1500 a year just for heating oil. Then they have electricity costs on top of this. Given the average dual fuel (gas and electricity bill) in the UK stands at approximately £1400 per year, this highlights the issues facing heating oil users.

 

Mark Askew, Chief Executive of FPS, the trade association for the oil distribution industry also explained another reason that heating oil customers in rural areas suffer from fuel poverty is because the cost of delivering heating oil has also risen. Heating oil distributors have been subject to similar, if not greater, rises in diesel fuel for their vehicles in recent years. As a result, delivering to rural communities that may be further from the supplier is more expensive. It also makes the delivery of lower volumes less cost effective and, in both cases, prices per litre to rural households have to rise. 

One other factor that impacts on heating oil users is the need to pay for their fuel up front. Unlike gas and electricity customers who can pay a flat rate monthly fee by direct debit, in general, heating oil users have to spend a large sum of money all in one go. The minimum order quantity across the UK is usually 500 litres so, if you take an average price of 60 pence per litre, you’re looking at an outlay of £300 + VAT at 5%. That can be a big hit to a monthly income. BoilerJuice does offer a monthly payment plan try and help heating oil customers spread the load by allowing them to pay into the plan monthly and then draw on these funds when they need to order their oil.

How will recent proposals by politicians help heating oil users in fuel poverty?

The simple answer appears to be not very much. While Ed Miliband did state at this years’ Labour party conference that he would look to impose a 20 month freeze on gas and electricity bills if Labour won the next general election, there was no mention of heating oil. However, when challenged on this later, the Labour party did state that they would also look into applying some sort of controls to heating oil as well. How this would work is yet to be explained. 

The coalition government is currently grappling with the idea of cutting green levies on energy bills. Again, this will have no impact on heating oil prices as heating oil suppliers are not subject to the same energy efficiency and green levies that the big six are accusing of causing some of the rises in gas and electricity bills.

What help is available to heating oil users to help combat fuel poverty?

There are a number of initiatives to help combat fuel poverty that are open to heating oil users. These include direct payments such as:

The Warm Homes Discount Scheme – a scheme offered by energy suppliers that has strict eligibility criteria that varies from supplier to supplier.  If you qualify, the scheme offers a £135 discount on electricity bills. 

Winter Fuel Payment – this is a government scheme for pensioners that offers between £100 and £300 tax free per year to help with heating bills. The amount you receive does depend on your age and other occupants of your household.

Cold Weather Payments – a government scheme aimed at people on certain benefits that offers payments when the local temperature is or is forecast to be below zero degrees Celsius or below for 7 or more consecutive days. The payment is £25 (2013/2014) per 7 day period and is available between 1^st November and 31^st March. 

Local authority help – some local authorities may have further financial grants available to low income households struggling to pay energy bills so it is worth contacting the local council to find out what is available. 

What can be done to reduce fuel poverty for heating oil users in rural areas?

There is no real prospect that energy bills, whether for heating oil or gas and electricity are going to decrease significantly in the future. Whilst heating oil prices have been surprisingly low this autumn due to increasing oil production in the US, recent attempts to broker peace in Syria and improving relations between the US and Iran, the general consensus is that prices will rise in the winter when demand for heating oil is higher. This means householders have to look at what they can do to reduce energy bills including:

• Monitoring prices for heating oil and buying when demand is low - the BoilerJuice heating oil prices chart helps householders to spot trends in heating oil prices and identify when there are dips in the price. Typically heating oil is cheaper in the summer so householders are wise to plan deliveries at this time of year.
• Buy in bulk - as with most things, the more you buy, the cheaper it gets so, if households can, they are advised to buy larger volumes less frequently. This does however require a larger outlay which, for lower income households, may not be possible. Payment plans can help with this. 
• Take advantage of Bulk-Buy Savings - savings can be made if several people order their heating oil in the same location at the same time as the tanker only has to make one journey to the area thus reducing transport costs. The BoilerJuice Bulk-Buy Savings scheme and Buying Weekends aim to do this when households order their heating oil on standard delivery. Since January 1st 2013 customers have saved over £251 000 by ordering this way. 
• Don't leave heating oil orders until the last minute. Emergency deliveries can cost significantly more. 
• Look at reducing other utility bills - such as telephone, broadband and electricity by using sites such as www.saveonhouseholdbills.com that can find cheaper deals and potentially save customers hundreds of pounds a year.