As promised, the Office of Fair Trading has completed its study into competition within the heating oil market and has made its findings public. However, it doesn't make pleasing reading for oil buyers; the press release from the OFT is entitled Off-grid energy suppliers need consumer law enforcement not regulation.
The OFT's main finding is that a regulatory framework would make very little difference in this market, as the retail mark-up is typically only around 10-15%. The bulk of the wholesale price of heating oil is the crude oil itself, and the fluctuations in the price of crude are beyond the scope of the OFT's report.
Following analysis over time of heating oil prices in conjunction with crude oil prices and outdoor temperatures, the OFT concludes that heating oil prices do indeed fall in line with crude oil prices as long as demand isn't increased by low temperatures. See annexe G, on page 71 onwards of the OFT Market Study Annexes.
It states in its Off-grid energy Q&A that the largest single supplier accounts for only 20% of the market, and that virtually all households can be served by at least four different suppliers. One might infer from this that the OFT is unaware of just how many suppliers are owned by the same conglomerate, but they do go on to say that their analysis is based on the number of firms operating, not the number of brands. These figures will come as a great surprise to many consumers, who have the definite impression that most suppliers in their area are owned by the same firm.
The only criticisms this report raised in relation to the heating oil supply industry were:
It comes as no surprise that the Federation of Petroleum Suppliers (FPS) reveals double standards when defending its heating oil supply members. On the one hand "its members want to do everything they can to help consumers in rural areas", yet on the other it acknowledges failings identified by the OFT and has launched a new Code of Conduct which aims to raise standards in the industry and encourage the implementation of best practice. (Source: OilFiredUp, 18 October 2011) So are oil suppliers trying to work in their customers' interests, or aren't they?
To summarise, you won't see any changes to the market at all, but there may be more sympathetic handling of complaints by the heating oil suppliers. If you want the best price, you will need to haggle as usual and hope that the suppliers are operating independently from each other. If you do suspect something when getting a quote, then you can contact Consumer Direct (a Government funded advice service) for help. Consumer Direct can be contacted on 0845 404 0506, or visit www.consumerdirect.gov.uk.
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