Question by Oliver S: Why is dyed #2 oil for home heating slightly more than undyed #2 oil sold as diesel fuel?
The current MA state surveys peg the price of home heating oil at $ 3.53/gallon and diesel at $ 3.51/gallon, and it doesn’t make any sense because they’re 100% the same #2 fuel but diesel fuel for highway use carries almost 70cents/gallon in taxes and is
Here in Massachusetts the total of federal and state road use and sales taxes on diesel fuels totals $ 0.6855 ($ 0.479/gallon plus an additional 6.25% sales tax which is roughly $ 0.2065 at the current average survey price of $ 3.51/gallon)
Home heating oil is exempt from road use tax and sales tax in Massachusetts, and should be at least 69 cents a gallon less, BUT IT COSTS MORE!!!
It makes no sense…. the road use fuel has a staffed retail outlet (cost per gallon unknown) and is usually paid using a credit card that charges the vendor around 3% (another 11 cents/gallon). Home heating oil is sold from a truck, several hundred gallons per delivery and no credit cards accepted. (The CC fees at the gas station are probably somewhat greater than the cost of delivering home heating oil).
In the 1980′s and 90′s the price of these two commodities routinely differed by the total of the road use tax and the sales tax. now they’re the same….
Either there’s an outlandish cabal among heating oil delivery companies, or government has imposed a hidden tax. Since the former could hardly go unnoticed, there’s no conceivable reason why this price structure exists unless Massachusetts has devised a hidden tax on home heating oil. Does anyone know what the Winter Hill mobsters masquerading as a state legislature on Beacon Hill have done and how they’re hiding it?
To add some detail, this curious pricing doesn’t just occur during the winter heating season, its all year long. Also – local fuel oil dealers will cite distribution terminal prices and some do compete aggressively on price. The price structure seems to be hijacked in somewhere between the refineries in New Jersey and the wholesale distribution terminals. My personal guess is a hidden tax on dyed (not for road use) fuel intended to advantage natural gas suppliers and the LNG terminals.
Answer by Mike
All I can think of is that the road fuel has a very small profit margin (around here the last I knew it was about 10 cents per gallon). The road fuel is also sold where a good share of the stations income comes from inside sales like soda, beer and food. Heating fuel is not as easy to get so the delivery company adds plenty to the cost of the fuel to cover their costs and profits. Maybe someone who knows more will weigh in on this.
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