Heating Oil Guide: Kerosene, Gas Oil & IHO

When it comes to heating large commercial spaces like warehouses, factories, or greenhouses, your choice of heating oil is a major financial and operational decision. With options like Kerosene, Gas oil, and IHO available, selecting the right one can feel overwhelming. Choosing incorrectly can lead to inefficient heating, higher maintenance costs, and even non-compliance with regulations. This guide is designed for you—the procurement manager, the operations director, the business owner—to demystify the world of commercial heating fuels. We’ll explore the distinct properties and applications of each fuel, helping you make an informed decision that optimises performance, reduces your heating bills, and supports your company’s bottom line.

In any business, from a haulage company heating its workshops to an agricultural business protecting crops in a greenhouse, energy is a significant overhead. The fuel you choose directly impacts not only your monthly expenditure but also your equipment’s longevity and reliability. For a procurement manager, the price per litre is just one part of the equation. You must also consider the energy output, maintenance requirements, and storage regulations associated with each fuel type. A seemingly cheaper option might lead to more frequent boiler servicing or lower heating efficiency, ultimately costing you more in the long run. Making a strategic choice from the outset ensures operational continuity, predictable budgeting, and a safe, warm environment for your staff and assets.

The decision between Kerosene, Gas oil, and IHO isn’t just about what will burn—it’s about what will perform best for your specific application. A modern, high-efficiency boiler in a commercial office block has very different fuel requirements than a large, robust furnace used to heat a sprawling factory or a grain dryer. Using the wrong fuel can lead to a host of problems:

• Inefficiency: A fuel that is too “heavy” or “light” for your system won’t burn cleanly, leading to wasted energy and higher consumption.
• Damage to Equipment: Incorrect fuel can clog filters, damage pumps, and cause soot build-up, leading to expensive repairs and downtime.
• Compliance Issues: Using Gas Oil (Red Diesel) for applications where it’s not permitted can result in significant fines from HMRC.

Understanding the nuances of each heating oil allows you to align your fuel procurement with your operational needs, ensuring you get the most value from every litre.

Kerosene, often referred to as 28-second oil due to its viscosity, is one of the most common and versatile heating fuels available in the UK. It is a lighter, cleaner-burning fuel compared to its heavier counterparts, making it the standard choice for most domestic properties and a wide range of commercial premises. As a purchasing manager for a business with modern office buildings, retail spaces, or light commercial units, Kerosene is likely the fuel your system is designed to use. Its clean-burning nature means less soot and fewer deposits, which translates to longer intervals between boiler servicing and a more reliable heating system.

Kerosene is a light, paraffinic oil. Its key characteristic is its low viscosity, which allows it to flow easily at low temperatures and atomise into a fine mist for efficient combustion. Standard Kerosene in the UK has a low sulphur content, which helps to reduce harmful emissions and is better for the environment. Some suppliers also offer premium kerosene grades, which include additives to improve efficiency, reduce sludge build-up, and inhibit corrosion within your tank and boiler system. When considering bulk kerosene prices for business, it’s worth asking your supplier about the benefits these premium grades can offer in terms of long-term maintenance savings.

Common Commercial Applications

While widely known as a domestic fuel, Kerosene is extensively used in commercial settings, including:

• Heating for office blocks, schools, and public buildings.
• Powering boilers in retail units and workshops.
• Fueling space heaters for temporary or localised warmth in warehouses.
• Certain types of industrial ovens and dryers.

Benefits and Limitations for Businesses

Benefits

• Clean Burning: Leads to lower maintenance costs and longer boiler life.
• High Efficiency: Modern condensing boilers running on Kerosene can achieve over 90% efficiency.
• Widely Available: As a common fuel, it’s readily available from suppliers across the UK.

Limitations

• Higher Cost per Litre: Tends to be more expensive than heavier oils like Gas Oil or IHO.
• Lower Energy Density: Provides slightly less heat energy per litre than heavier fuels

A unique insight for supply chain managers is to consider the trade-off: while the upfront cost of Kerosene may be higher, the reduced maintenance and higher efficiency of the compatible heating systems can lead to a lower total cost of ownership over the boiler’s lifespan.

Gas Oil, also known as 35-second oil or, more commonly, Red Diesel, is a heavier and more robust fuel than Kerosene. The red dye is a fiscal marker added by HMRC to indicate it carries a significantly lower tax rate. This tax rebate means its use is strictly controlled and limited to specific off-road, agricultural, and heating applications. For businesses with large, industrial-scale heating needs, such as factories, foundries, or large agricultural buildings, Gas Oil has historically been the fuel of choice due to its high energy output and lower cost.

Gas Oil is a middle-distillate fuel, meaning it is less refined than Kerosene. Its higher viscosity (the reason it’s called 35-second oil) means it is thicker and doesn’t burn as cleanly. This can result in more soot and requires boilers and furnaces that are specifically designed to handle it. It is also more resilient to cold temperatures than some other fuels, making it reliable for external tanks in the winter months. One of the most important recent changes for businesses to be aware of is the reform to Red Diesel regulations in April 2022, which removed the entitlement for many sectors, including construction, to use it for non-road mobile machinery. However, its use for commercial heating remains permissible.

Agricultural and Industrial Uses

The primary legal uses for Gas Oil in a heating context today include:

• Heating large industrial spaces like factories and warehouses.
• Powering grain dryers and heating agricultural buildings.
• Heating greenhouses and horticultural premises.
• Fueling industrial furnaces and burners.

When sourcing agricultural fuel suppliers, it’s crucial to ensure they provide clear guidance on the legitimate uses of red diesel to keep your operations compliant.

Navigating the Legal Landscape of Red Diesel

The key consideration for any operations manager is ensuring Gas Oil is used correctly. Using it for any road-going vehicle is illegal tax evasion. Furthermore, you must ensure your heating system is genuinely a commercial application. Using it to heat a domestic property, for example, would be a breach of the rules. Accurate record-keeping of fuel purchases and usage is essential to demonstrate compliance to HMRC if an inspection occurs. Penalties for misuse are severe, including back-payment of tax and potential seizure of equipment.

In the world of commercial fuels, a new player has gained significant traction: Industrial Heating Oil (IHO). This fuel has been specifically developed as a cost-effective, drop-in alternative to Gas Oil for heating applications. For procurement managers constantly looking to reduce overheads without compromising on performance, IHO presents a compelling proposition. It is a sulphur-free, FAME-free heating oil that is custom-blended to closely mimic the burning characteristics of Gas Oil, but because it is not subject to the same tax regime as traditional diesel, it can be sold at a lower price.

IHO is a bespoke blend of petroleum distillates. Unlike Gas Oil, it does not contain the red dye marker, as it is an exclusively commercial heating fuel with no road-use permissions. Its key technical difference and advantage is often its lower sulphur content and lack of FAME (Fatty Acid Methyl Esters), which is a component of biodiesel. The absence of FAME makes IHO more stable in storage and less susceptible to microbial growth (“diesel bug”), which can be a major problem in large storage tanks. This makes it an excellent choice for businesses looking for a fuel that requires less maintenance and has a longer shelf life.

The primary driver for businesses switching to IHO is cost. It is significantly cheaper than both Gas Oil and Kerosene, leading to immediate savings on heating bills. But the benefits extend beyond the price per litre.

• Reduced Maintenance: The cleaner-burning properties of some IHO blends can lead to less soot and build-up in your boiler compared to Gas Oil.
• Improved Storage Stability: The absence of FAME reduces the risk of filter blockages and fuel degradation.
• Price Stability: As a specially blended product, its price can sometimes be more insulated from the volatile swings of the global diesel market.

When researching the cost of industrial heating oil, you’ll find it offers the best of both worlds: performance comparable to Gas Oil at a much more attractive price point.

For the vast majority of systems designed to run on Gas Oil, IHO is a direct, drop-in replacement. This means you can add it to your existing tank without needing to empty it or make any modifications to your boiler or burner. This seamless transition is a major operational advantage, as it means no downtime and no capital expenditure on new equipment. Before making the switch, it is always best practice to consult with your fuel supplier and a qualified heating engineer to confirm compatibility with your specific system, but in most cases, switching from gas oil to IHO is a simple and highly effective cost-saving measure.