CES Spotlight Blog
Heating Oil Cleans Up
Heating oil dealers may not be “cleaning-up” at the bank these days, as evidenced by the rush of oil dealers into alternative products (including retail electricity, compressed natural gas, biomass and solar) to supplement their declining core business. The fuel going into home and business oil tanks, however, will soon be a bit cleaner in the Northeast.
The EIA recently published the below table showing the scheduled reduction in sulfur limits in six Northeast states. Sulfur in heating oil contributes to acid rain and soot pollution and is listed as a criteria pollutant by the US Environmental Protection Agency.
New York has already made the transition to 15 parts per million (ppm) heating oil. Connecticut, New Jersey, Maine, Massachusetts and Vermont will soon follow, but have chosen to phase in reductions.
If you use heating oil at your home or business you are probably already looking for a lower cost or cleaner alternative. A surge in new pipeline projects is poised to bring lower cost natural gas within reach of many long time oil users. At current market prices, pipeline natural gas can provide a savings of 50% compared to heating oil. Propane, compressed natural gas, liquefied natural gas, solar thermal, and biomass are other alternatives to heating oil that are getting a lot of attention today where pipeline natural gas is unavailable. Given the very high concentration of heating oil users in the Northeast US, however, it will take many years to “get off oil”. For this reason, reductions in the allowable sulfur content of heating oil will undoubtedly improve regional air quality.
As mentioned in a previous blog on this topic, the patchwork of state implementation deadlines and intermediary steps creates confusion in the marketplace. It is likely that most heating oil consumption will transition to the lower sulfur levels long before the deadlines imposed by state mandates.
Over-the-road equipment is already required to use 15 ppm diesel – called ultra low sulfur diesel or ULSD. Starting with May 2013, futures contracts for heating oil listed on the New York Mercantile Exchange (NYMEX), have a 15 ppm sulfur limit. To accommodate over-the-road diesel, the New York heating oil requirement, and the new NYMEX specification, many refineries and distillate storage facilities have already made the transition to 15 ppm. Your tanks may therefore already be receiving 15 ppm oil even if they are located in a state with a 3,000 ppm or higher limit.
A lower sulfur limit requires extra refining steps and is likely to result in some increased cost for heating oil users. This will only increase the appeal of alternatives and contribute to the accelerating trend of oil users looking for lower cost alternatives.
Tags: New York, Connecticut, New Jersey, Maine, Massachusetts, Vermont, Sulfur, Heating Oil, EPA, EIA, CNG, compressed natural gas