Kerosene prices are high because of a combination of shrinking refinery capacity, strict sulfur regulations, seasonal demand spikes, and competition with the aviation industry for the same refined product. At around $2.20 per gallon for residential use, kerosene costs noticeably more than alternatives like propane ($1.80 per gallon), and the gap has been widening as global refining shifts reshape the supply chain.
Refineries Are Closing, and Supply Is Tightening
The single biggest factor pushing kerosene prices up is that fewer refineries are producing it. North America and Europe are expected to lose 2.4 million barrels per day of refining capacity between 2020 and 2026. Older facilities in developed countries are shutting down or converting to biorefineries as demand for gasoline and diesel declines due to electrification and efficiency gains. The Grangemouth refinery in the UK and the Wesseling facility in Germany are both closing in 2025, and the U.S. West Coast has already experienced several closures that tightened fuel inventories in the region.
Kerosene gets hit especially hard by these closures because it’s a middle distillate, produced alongside diesel and jet fuel during the refining process. A refinery doesn’t make kerosene on its own. It’s one product in a slate that includes gasoline, diesel, and heavier fuels. When a refinery shuts down, all of those products lose supply at once. But kerosene, being a smaller-volume product compared to gasoline or diesel, has less bargaining power to keep refineries open. As IATA has noted, aviation fuel production (which overlaps significantly with kerosene) “cannot alone guarantee the viability of operations” at a refinery. So kerosene supply shrinks even when demand holds steady.
Jet Fuel Competes for the Same Product
Kerosene and jet fuel are essentially the same distillate fraction of crude oil. The aviation industry consumes enormous volumes of kerosene-type fuel, and air travel demand has rebounded strongly since the pandemic. That creates direct competition between airlines and residential heating customers for the same refined product. When jet fuel demand rises, less kerosene is available for home heating, and prices climb accordingly. In Japan, refinery closures contributed to a nationwide aviation fuel shortage, illustrating how tight the market has become. Regions that lose a nearby refinery have to source fuel from farther away, adding transportation costs that get passed to consumers.
Seasonal Demand Drives Winter Price Spikes
Even when crude oil prices are stable, kerosene and heating oil prices rise between October and March, when heating demand peaks. A typical household in the U.S. Northeast burns 850 to 1,200 gallons of heating oil during winter and almost none the rest of the year. That extreme seasonality creates predictable but painful price swings. Suppliers must stockpile inventory ahead of winter, and when cold snaps hit unexpectedly or last longer than usual, prices can spike sharply because there’s limited ability to ramp up refinery output quickly.
This pattern is made worse by the refinery closures described above. With fewer refineries operating, the system has less spare capacity to absorb demand surges. A region that could previously draw on two or three nearby refineries during a cold snap may now depend on one, or on fuel shipped from much farther away.
Sulfur Regulations Add Refining Costs
The EPA requires that kerosene blended with diesel fuel meet a sulfur standard of no more than 15 parts per million. That’s an extremely tight limit, and meeting it requires additional refining steps that add cost. Kerosene that comes in above that threshold can’t simply be sold as-is. It has to be further processed or carefully blended at the terminal level to bring sulfur content into compliance. These low-sulfur requirements exist for good reason (reducing air pollution and protecting catalytic converters in vehicles), but they make kerosene more expensive to produce than it would be without them.
How Kerosene Compares to Alternatives
At $2.20 per gallon versus $1.80 for propane, kerosene looks like the more expensive choice on the sticker. But the comparison isn’t quite that simple. Kerosene produces about 135,000 BTU per gallon, while propane delivers roughly 91,600 BTU per gallon. That means kerosene generates about 47% more heat energy from the same volume of fuel. When you calculate cost per unit of heat rather than cost per gallon, kerosene can actually be competitive with or cheaper than propane for home heating.
Natural gas, where available through pipeline infrastructure, remains significantly cheaper than either option on a per-BTU basis. But many rural homes that rely on kerosene don’t have access to natural gas lines, which is part of why they’re using kerosene in the first place. The lack of alternatives in these areas means consumers have limited ability to switch fuels when kerosene prices rise, giving suppliers less price pressure from competition.
Why Prices Are Unlikely to Drop
The forces driving kerosene prices upward are structural, not temporary. Refinery closures in developed countries are accelerating as part of the broader energy transition. Aviation demand for kerosene-type fuel continues to grow. Environmental regulations are tightening, not loosening. And the seasonal demand cycle isn’t going anywhere as long as millions of homes depend on oil-based heating. For consumers locked into kerosene heating, the most practical response is to lock in prices with pre-buy contracts before winter, improve home insulation to reduce fuel consumption, or explore converting to heat pump systems that can dramatically cut heating costs over time.