What is the cost of Industrial Heating Oil (IHO)?

As a procurement or operations manager, controlling volatile operational costs is a constant priority. For businesses relying on liquid fuel for heating large spaces like warehouses, factories, or agricultural buildings, the price of Industrial Heating Oil (IHO) is a significant and fluctuating line item. Unlike a fixed utility bill, the IHO market moves daily, influenced by a complex web of global and local factors that can make budgeting a serious challenge. This guide is designed for you. We will demystify the IHO market, breaking down exactly what drives the price you pay for every litre. More importantly, we’ll move beyond simple explanations and into actionable, strategic advice on procurement, helping you shift from being a reactive buyer to a proactive manager of your company’s heating costs. Understanding these dynamics is the key to unlocking significant savings and bringing predictability to your energy budget.

The primary difference is taxation. IHO is a rebated fuel intended solely for heating and is subject to a much lower rate of fuel duty than red diesel, which can be used in off-road machinery and vehicles. This tax difference is the main reason for the significant cost saving.

The primary reason for IHO’s existence and popularity is economic. It is treated differently for tax purposes compared to fuels used for transport or mobile machinery. Because it is intended solely for heating, it carries a much lower rate of fuel duty. This tax advantage is passed directly to the consumer, making the price of Industrial Heating Oil (IHO) significantly more attractive than using gas oil for the same purpose. For a purchasing manager, this is a crucial distinction; using IHO is a direct strategy for business energy cost reduction. Furthermore, IHO is designed to be a “drop-in” fuel, meaning it’s fully compatible with most heating systems that can run on gas oil, eliminating the need for expensive equipment modifications. This blend of lower cost and operational simplicity makes it the default choice for many businesses’ heating needs.

The price you are quoted for a delivery of IHO is the end product of a dynamic and multi-layered supply chain. It’s not a simple retail price; it’s a commodity price. For procurement, understanding these layers is fundamental to developing an effective commercial heating oil procurement strategy. You can’t control the market, but you can understand it—and that knowledge allows you to anticipate trends and buy smarter. The key factors affecting IHO price today fall into three distinct categories.

• Global Markets: The international price of crude oil and the strength of the pound against the US dollar set the foundation cost.
• National Logistics: Costs are added for refining and the entire delivery journey to your tank. Larger orders will lower your price per litre.
• Commercial Factors: Prices are typically higher during peak winter demand and include the supplier’s operational margin.