Fuel oil is any liquid petroleum product burned to generate heat or power. It ranges from light, nearly transparent liquids used in home furnaces to thick, black residues that power ocean-going cargo ships. The term covers six numbered grades (No. 1 through No. 6), each heavier and more viscous than the last, all produced during the refining of crude oil.
How Fuel Oil Is Made
Crude oil is heated in a refinery distillation tower, and different products boil off at different temperatures. The lightest fractions become gasoline and jet fuel. Slightly heavier fractions become fuel oils No. 1 and No. 2, called distillate oils because they vaporize and condense cleanly during this process. The thick, tar-like material that remains at the bottom of the tower after everything lighter has been removed becomes residual fuel oil, grades No. 5 and No. 6.
This distinction between distillate and residual is the most important dividing line in the fuel oil world. Distillate oils are relatively clean, flow easily at room temperature, and burn with fewer pollutants. Residual oils are so viscous they must be heated before they can even be pumped through a pipe, let alone sprayed into a burner. They also contain far more sulfur and other impurities, because those contaminants concentrate in the bottom of the refining process.
The Six Grades Explained
Fuel oil grades are numbered 1 through 6. As the number goes up, so do the boiling point, the viscosity, and the carbon chain length (from roughly 20 carbon atoms per molecule at the light end to 70 at the heavy end). Price, however, generally moves in the opposite direction: heavier grades cost less per gallon because they require less refining.
- No. 1 is essentially kerosene. It is a mixture of 9- to 16-carbon hydrocarbons, roughly 64% straight-chain molecules and 35% aromatic compounds. It burns cleanly and is used in portable heaters, lamp oil, and some jet engines.
- No. 2 is the most widely recognized grade. It is chemically almost identical to diesel fuel and is the standard oil delivered to homes with oil-fired furnaces. When burned in a truck engine it is called road diesel; when burned in a boiler it is called heating oil. The main differences are sulfur content, additives, and taxes. Heating oil is not taxed the same way as on-road diesel, which makes it cheaper for residential use. A gallon of No. 2 heating oil contains about 138,500 BTUs of energy.
- No. 4 sits at the boundary between distillate and residual. It is usually a blend of No. 2 and No. 6, though sometimes it is simply a heavy distillate. Commercial buildings and smaller industrial boilers are its typical customers.
- No. 5 is a blend of about 75 to 80 percent No. 6 with enough No. 2 mixed in to lower its viscosity to a manageable level.
- No. 6 is the heaviest commercial fuel oil. Its composition is roughly 25% aromatic hydrocarbons, 45% ring-shaped molecules called naphthenes, 15% straight-chain paraffins, and 15% non-hydrocarbon compounds including sulfur, nitrogen, and metals. It must be stored and transported at elevated temperatures or it will not flow. Far more No. 6 is produced than No. 5, so the terms “heavy fuel oil” and “residual fuel oil” are often used as synonyms for No. 6 specifically.
Where Each Grade Is Used
Distillate oils (No. 1 and No. 2) dominate residential and small commercial heating. If your home has an oil tank in the basement, the delivery truck fills it with No. 2. These lighter grades also power diesel generators, construction equipment, and agricultural machinery.
Residual oils (No. 5 and No. 6) are burned in settings where the equipment is large enough to handle their thickness and impurities. Utility power plants, steel mills, cement kilns, and large manufacturing boilers all use residual oil when natural gas is unavailable or too expensive. These facilities have the preheating systems and burner technology needed to atomize heavy oil into a fine spray that ignites efficiently.
Bunker Fuel and the Shipping Industry
The single largest consumer of heavy fuel oil is the global shipping industry. The thick, pitch-black residual oil burned by cargo ships is known as bunker fuel, named after the onboard fuel storage compartments called bunkers. Because it is made from the cheapest leftovers of the refining process, bunker fuel has historically been loaded with sulfur and other contaminants. Waste byproducts from refining sometimes end up in the mix as well.
For decades, ships at sea burned fuel with an average sulfur content of about 2.7%, producing massive quantities of sulfur oxides and fine particulate matter. Coastal cities and port communities bore the brunt of this pollution. In 2020, the International Maritime Organization enacted a global sulfur cap, cutting the allowable sulfur content in marine fuel from 3.5% to just 0.5%. That single regulation reduced total sulfur oxide emissions from shipping by roughly 70%.
Most ship operators responded by switching to cleaner fuels like marine gas oil, a light distillate that is nearly transparent and dyed yellow or red for identification. An estimated 10 to 15 percent of ships chose instead to keep burning cheap heavy fuel oil and install exhaust scrubber systems that capture sulfur and particulate emissions before they leave the smokestack. In certain Emission Control Areas near the coasts of Europe and North America, even stricter limits apply, and ships must use ultra-low sulfur fuel when approaching shore.
Environmental and Health Concerns
The heavier the fuel oil, the dirtier it burns. No. 6 fuel oil produces significantly more sulfur dioxide, nitrogen oxides, and particulate matter per gallon than No. 2. Sulfur dioxide reacts in the atmosphere to form fine particles that penetrate deep into the lungs and contribute to respiratory and cardiovascular disease, particularly in communities near ports, power plants, and industrial facilities.
Spills are another concern. Light distillate oils evaporate relatively quickly and break down faster in the environment. Heavy residual oils, by contrast, are sticky and persistent. They coat shorelines, smother marine life, and resist natural weathering for months or years. Their high concentration of aromatic hydrocarbons and heavy metals makes them especially toxic to aquatic organisms.
Regulations have tightened steadily. Beyond the IMO’s marine sulfur cap, many countries now restrict or ban residual fuel oil for power generation, pushing utilities toward natural gas or renewable sources. Sulfur limits on home heating oil have also dropped in recent years, narrowing the chemical gap between heating oil and on-road diesel.
How Fuel Oil Compares to Other Energy Sources
A gallon of No. 2 fuel oil delivers about 138,500 BTUs, which is comparable to diesel and slightly more energy-dense than a gallon of propane (about 91,500 BTUs). Natural gas, sold by volume rather than by the gallon, provides roughly 1,030 BTUs per cubic foot. In practice, a home burning fuel oil will use fewer gallons than a propane home uses gallons of propane to produce the same amount of heat, but natural gas is often cheaper per BTU in areas where pipeline infrastructure exists.
Fuel oil remains the primary heating source in parts of the northeastern United States where natural gas pipelines were never built. For these households, No. 2 heating oil is not a choice but a legacy of infrastructure, and the price per gallon fluctuates with global crude oil markets. In industrial and marine settings, the economics are different: heavy fuel oil persists because it is the cheapest liquid fuel available, even after factoring in the cost of preheating equipment and emissions compliance.