Are consumers getting fleeced as they struggle to stay warm?

Neil Parish MP writes in the Western Morning News, examining the causes of the price hike in heating oil over the Winter.This winter's cold snap has revealed glaring inequalities in this country when it comes to heating our homes.The vast majority of houses in Britain are connected up to the mains gas supply and benefit from relatively cheap, efficient and well regulated supply of energy for heating their homes.What the severe weather has highlighted is the vulnerability of those not on the gas grid, who are being charged exorbitant amounts of money for heating oil and are currently at the mercy of a small number of big oil distribution companies.There are currently 2.5million people not connected to the gas grid. These households are predominately in rural areas, with poor transport infrastructure, that rely on oil deliveries by road. Some of my constituents were left waiting for days and sometimes weeks for deliveries during the bad weather.These rural areas in Devon and Cornwall have no choice but to use heating oil, an expensive way of heating one's home compared to gas. In October 2010, just before the bad weather hit, the national average for the cost of using oil to heat a typical three bed house was just over £1,200 per year. For those lucky enough to be on gas it was around £950 per year, a saving of around £250.In December 2010 I was inundated with e-mails from many concerned constituents about the price they were paying for heating oil. One constituent from Clayhidon was paying 74p per litre and another from Membury was paying 69p per litre, up from 55p the previous week.Nationally the price of heating oil had increased from around 41p per litre in September 2010 to around 71p per litre in December, an increase of around 73 per cent; this is despite only a 10 per cent rise in the wholesale price and a 17 per cent rise in the price of crude oil.Obviously the weather has had an impact and historically the demand has always been seasonal.The price of heating oil tends to rise gradually in the winter months when the demand is at its highest.A typical house might use 2,500 to 4,000 litres of heating oil during winter but consume very little during the rest of the year. This is unavoidable but the steep, sudden price rise cannot be accounted for purely by the weather, nor by simple \\supply-and-demand\\.Northern Ireland, like much of Britain, was hit with severe weather this winter. But unlike Britain Northern Irish customers were not being charged as much for their oil.According to the Consumer Council in Northern Ireland prices only went as high as 66.64p per litre, a full 4p cheaper than the UK average in December.Northern Ireland has always been more reliant than the rest of the UK on heating oil, with some 68 per cent of houses relying on kerosene. Britain only has 17 per cent of its houses reliant on oil, which leads to the conclusion that we have a lower demand than Northern Ireland for oil but are still paying more.There are clearly other forces at work here.There has been much speculation over the last two months as the cause of these astronomical heating oil prices.One possible reason is that these artificially high prices are caused by a lack of competition in the heating oil market.There are very large oil distribution companies that have virtual monopolies in some parts of the country.Is it the lack of competition that has allowed some companies to charge customers unchallenged?Another possible cause is the oil refineries themselves. Oil refineries may be purposefully withholding kerosene from the distribution companies in order to hike up the price.If I am entirely honest I am still unsure as to who or what the real culprit is in all this. All I know is that someone has dropped the ball on this one.Whether it is lack of competition in the market, oil refineries withholding supplies or companies simply marking up their prices; the only way to prevent this from happening again is to create proper scrutiny and regulation of the heating oil market.Unlike gas and electricity, the heating oil market has no regulatory body promoting and ensuring competition and standards of practice.The Office of Fair Trading (OFT) can monitor the market and if it suspects that anti-competitive behaviour is taking place, such as price-fixing or abusing a dominant position, the OFT can investigate and refer behaviour to the Competition Commission.What we really need is a regulator like Ofgem for the heating oil market. A regulator with more bite and scope than the Office of Fair Trading to protect consumers, promote and foster competition and bring great transparency to the market would seem to me to be the ideal solution.Neil Parish MP