Under pressure to react quickly to the energy crisis, chancellor Rachel Reeves has confirmed a targeted £50m package of support for low income and vulnerable households which use heating oil (kerosene) with the money distributed by local councils.

The price of kerosene – the fuel used for heating oil - has been badly affected by the conflict and has risen faster than other fuels such as petrol and gas.

The main problem is that heating oil does not fall under the quarterly energy price cap, which shelters households on the grid from the huge hikes in gas prices, at least until June. Heating oil is delivered to individual properties and stored in large outdoor tanks as the homes are not on the main grid, while the sector is not regulated, even by Ofgem.

Certain parts of the country, including rural areas and up to 60% of Northern Ireland properties are reliant on heating oil and the government was acutely aware that ‘many, including some of the most vulnerable households, will need to pay an upfront lump sum to top up their tanks in order to maintain their heating and hot water’. 

In England, funding will be distributed by local through the Crisis and Resilience Fund (CRF), which comes into effect from 1 April, targeting areas with higher rates of oil heating. 

England will receive £27m, worst affected Northern Ireland £17m, Scotland £4.6m and Wales £3.8m.

Reeves said: ‘Heating oil prices have spiked sharply, and I know that for families in rural communities that is a real and urgent problem. That’s why we’re putting over £50m of support to help the people who need it most, including funding for the Northern Ireland Executive to deliver support in Northern Ireland where this issue hits hardest.’ 

The Treasury confirmed the ‘funding has been allocated based on census data, reflecting where the greatest need is, and it will be allocated directly to the devolved governments’.

The heating oil crisis has also triggered a broader review of the sector, with the government also announcing plans to regulate the heating oil sector for the first time and introduce new consumer protections, alongside securing agreement with industry to ‘quickly improve customer experiences’, the Treasury said.

In addition, the Competition and Markets Authority (CMA) is looking into the sector to make sure there is no excessive profit gouging, and the government is considering setting up an ombudsman and appointment of a regulator, such as Ofgem, for heating oil consumers, which would be legislated in the Energy Independence Bill.