Heating Oil Market Study

On 20 March, the Competition and Markets Authority ("CMA") formally launched a market study into the retail supply of heating oil - predominantly kerosene used in domestic central heating systems - in the United Kingdom. 

The study comes against the backdrop of significant price volatility in the heating oil market following the outbreak of conflict in the Middle East, and widespread consumer concern about the terms on which heating oil has been supplied. The market study will build on the Office of Fair Trading's 2011 market study into off-grid energy and will complement the CMA's recently announced work to identify and tackle suspected breaches of consumer law in the heating oil market.

The CMA is aiming to publish its final report by end of June 2026, within three months of launch.  

What will the CMA be looking at?

Heating oil is used by approximately 1.5 million homes across the UK, including around 500,000 homes in Northern Ireland - representing almost two-thirds of all households in that nation. 

Unlike most other forms of domestic heating, heating oil is not currently regulated by Ofgem in Great Britain or the Utility Regulator in Northern Ireland, meaning that consumers in this market lack many of the protections available to those on the gas and electricity grid. Specific market features include:

• There is a lack of protection for consumers in debt or suffering financial difficulty;
• There is no supplier of last resort and no obligation on suppliers to ensure security of supply;
• There are no formalised regulations on charging, leaving scope for price discrimination and limited options for payment methods;
• Consumers have no access to mandatory independent alternative dispute resolution ("ADR") or an ombudsman;
• There is no Priority Services Register, or equivalent, to address consumer vulnerability; and
• There are no requirements on suppliers to provide energy efficiency information or advice.

In assessing whether there are features of the market that are not working well for consumers, the CMA has proposed to focus on the following key issues:

• Price effects of the global oil price surge: an assessment of the impact of the sudden increase in global oil prices on heating oil distributors' retail prices and profit margins;
• Reasons for retail price increases: investigation into why retail prices have risen, including an assessment of the challenges faced by suppliers in sourcing and maintaining sufficient stocks of heating oil, and how any shortages may have impacted pricing incentives;
• Competition between suppliers: the extent to which competition between suppliers restrains price rises;
• Price transparency: whether there is sufficient price transparency for customers to enable effective consumer choice; and
• Supplier conduct: evidence of poor conduct on the part of suppliers, or of other aspects of the functioning of the market, that may harm customers - particularly during periods of volatile input costs.

The CMA has framed a "well-functioning" heating oil market as one in which consumers have a genuine choice of suppliers who compete on both price and service quality; suppliers are incentivised to treat customers fairly with reasonable and appropriate pricing practices, including during periods of high or volatile input costs; prices are transparent and inform consumer choice; and appropriate consumer protection measures are in place.

In terms of geographical scope, the CMA will look at the supply of heating oil across the whole of the UK, whilst acknowledging that the market appears to function differently in Northern Ireland compared to the rest of the UK, and noting that energy policy is a devolved matter in Northern Ireland.

Process and Possible Outcomes

Although technically it has 12 months to complete the study, owing to the acute nature of the challenges faced by consumers at this time, the CMA is aiming to complete it within three months of launch (i.e. by June 2026), including publishing any recommendations to governments.

The study will be conducted in line with the CMA's "4Ps" framework:

• Pace:  The CMA has set itself the three-month completion target described above. 
• Predictability: The Project Roadmap sets out key milestones: 
  • March - April 2026: Initial engagement, evidence gathering and analysis.
  • April - May 2026:  Internal "state of play" meetings to reassess scope against the evidence gathered.
  • May - June 2026: Further evidence gathering and analysis.
  • June 2026: Publication of the final report in June 2026. 
• Proportionality: The CMA has committed to a targeted approach to evidence gathering, including when using its statutory information gathering powers, ensuring that requests are proportionate to the importance of the issues at hand. 
• Process: The CMA will engage with businesses and wider stakeholders to understand the likely impacts of its emerging thinking and to inform key decisions throughout.

At this stage, the CMA has identified two likely outcomes from the market study: 

• Specific recommendations to governments, including, for example, on how best to deliver enhanced regulatory protections for consumers and/or improved price transparency; and 
•  Direct CMA action to improve competition and consumer outcomes such as enforcement action if suspected breaches of consumer or competition law are identified. 

Commentary

The timing of this market study is notable: it is not the product of a long-running policy process but rather a direct and rapid response to the consumer detriment caused by recent price volatility in the heating oil market. The three-month target for completion is unusually ambitious for a market study - and reflects the CMA's acknowledgement that the challenges facing heating oil consumers are acute and require urgent attention rather than a prolonged investigative process.

The absence of sector-specific regulation is a central theme of the study. Heating oil customers currently lack the suite of protections that regulated energy consumers enjoy, and the CMA's likely focus on transparency, consumer vulnerability and pricing conduct echoes the remedies that have emerged from other CMA market investigations into consumer-facing markets. 

The Northern Ireland dimension warrants particular attention. Given that heating oil accounts for almost two-thirds of all domestic heating in Northern Ireland, the impact of any CMA recommendations or enforcement action will be felt disproportionately there, and the CMA's acknowledgement of the devolved nature of energy policy in Northern Ireland suggests it will be seeking to engage closely with the relevant authorities in that nation.

Next steps

The immediate next steps will involve information gathering and market engagement, with the CMA expecting to engage with suppliers, industry representatives, consumers and consumer groups, UK and devolved governments, and regulatory bodies. The CMA will also use its formal statutory powers to issue Requests for Information ("RFIs") where appropriate.

Written submissions on the proposed scope must be made by 8 April 2026 by email to heatingoil@cma.gov.uk.

All businesses operating in the heating oil market - whether as distributors, wholesale suppliers, or otherwise - should take the CMA's engagement seriously, given the risk of direct enforcement action as well as structural remedies. This will be particularly important for suppliers active during periods of peak pricing volatility, as the CMA is likely to scrutinise pricing and margin data closely. 

Businesses and other interested parties wishing to engage with the CMA's market study are encouraged to seek legal advice on the most effective way to participate in the process and on the potential implications of the study's possible outcomes for their businesses. 

Article co-authored by Helena Siebenrock, Trainee Solicitor