Heating oil customers to get compensation after price hikes

Heating oil customers will receive compensation following price increases and order cancellations that occurred after the outbreak of the US-Israel war with Iran, according to the competition regulator.

Approximately 1,700 households were compelled to "re-order at significantly higher prices or go without fuel," resulting in costs of up to £350, as reported by the Competition Markets Authority (CMA). Some suppliers have agreed to provide compensation, while the regulator is preparing legal action against those who have refused to comply.

The UK and Ireland Fuel Distribution Association (UKIFDA), which represents heating oil suppliers, acknowledged that "there were a small number of cases found which require redress."

Wholesale oil prices surged from about $70 a barrel at the onset of the Iran conflict in February to nearly $120 a barrel by the end of March, disrupting energy transportation and production in the region. During this period, UK heating oil prices also saw a significant increase. The CMA stated on Wednesday that "average retail prices were, at their peak, 92% higher."

The CMA's investigation into the heating oil market revealed that the price hikes following the Iran war were primarily due to rising wholesale costs, and suppliers did not gain materially from the crisis. However, it found that heating oil customers lack the same protections as those connected to the energy grid.

The CMA has recommended new regulations regarding price quotations and cancellation procedures, as well as "better support for vulnerable consumers." Chancellor Rachel Reeves commented, "It is reassuring to know it is a competitive market, but the lack of protection for these households does concern me, so we will look very seriously at what can be done."

UKIFDA chief executive Ken Cronin stated, "We will work with all government bodies on the recommendations set out in this report."

The CMA has not disclosed how many suppliers have agreed to compensate customers for cancelled orders, how many customers will receive payouts, or the amount they will receive. "Those who paid more to replace their cancelled order will receive a payment covering the difference, while those who did not buy replacement oil will have their original orders honoured at the agreed price," the CMA explained. "[We are] preparing to take court-based enforcement action against firms that fail to compensate customers voluntarily," it added.

The BBC has learned that more details will be shared once the compensation scheme is operational. The CMA's report on the heating oil sector follows a four-month investigation initiated in March.

Heating oil users typically store it in an outdoor tank and are among the first to feel the effects of rising prices. About 1.5 million households rely on heating oil but do not enjoy the same consumer protections as electricity and gas customers, according to the CMA. Most of these households are located in Northern Ireland, where the watchdog indicates that 60% of homes depend on heating oil.

Anthony Maines, 31, from Seaton Delaval in Northumberland, recounted that he paid £463.83 for 700 litres of heating oil on February 28. He placed the order through a broker upon learning of the US and Israel's initial attacks on Iran, but the order was cancelled a few days later. He was then forced to reorder 500 litres of oil for approximately £700 through a different broker. Anthony decided to secure the lower price at the conflict's onset, anticipating that prices would rise. He supports the CMA's approach, particularly given his experience. "It felt like I was being punished for doing the sensible thing," he remarked.

He received a partial resolution through his broker, who agreed in May to honor the original price he paid at the end of February, but by that time, he had already purchased oil elsewhere at a higher price.

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'My heating oil costs have more than doubled since the Iran war started.'