Beyond the Price of Heating Oil: Why Contract Terms Matter for UK Businesses

Kerosene is a refined petroleum product and the primary fuel used for heating oil boilers in the UK. Given how widely kerosene underpins essential heating and operational needs across residential and commercial systems, stability in its supply and in its pricing is crucial.  

Many businesses have experienced significant increases in heating oil prices since early March 2026, creating operational and financial challenges across a range of sectors. Manufacturers, farms, logistics operators, care facilities, hospitality venues and estates relying on kerosene-based heating or machinery fuel have been facing substantial cost pressures, particularly where fuel costs form a significant part of operating expenditure. Some customers have reported order cancellations, revised quotations, or requests to renegotiate pricing in response to rapidly changing wholesale market conditions. 

For businesses with oil supply contracts, this situation raises important legal and commercial questions. 

Why prices are rising?

1. Geopolitical disruption is driving market volatility

The escalation of conflict in the Middle East in late February disrupted shipping routes, particularly in the Strait of Hormuz, which is a narrow channel, approximately 30 miles wide at the narrowest point, between the Omani Musandam Peninsula and Iran through which nearly 20% of global oil supply flows.  

2. Heating oil tracks the jet fuel market

Heating oil is kerosene-based and is the same product used for producing jet fuel. Industry reports indicate that wholesale fuel markets have experienced significant volatility, placing pressure on distributors and customers alike.  

3. Distributors are buying at daily wholesale prices

Some UK distributors hold limited stock, meaning they are effectively price takers, purchasing at highly volatile daily market rates. This can make forward pricing extremely difficult and, in some cases, lead to order cancellations. 

What this means for businesses with supply contracts 

The key question many businesses are asking is: “Can my supplier cancel my order or increase the price?”. The answer depends entirely on your contract. 

1.Fixed‑price contracts

If your business has secured a fixed price for a delivery or supply period, the supplier cannot unilaterally increase that price unless the contract expressly provides for one of the following: 

a) Price adjustment mechanisms  

b) Extraordinary cost‑increase clauses 

c) Formal variation rights

Where a supplier cancels an agreed delivery and then issues a higher re‑quote, this may amount to a repudiatory breach of contract. In such circumstances, you may be entitled to claim damages for the direct losses caused by the non‑delivery. These can include the additional cost of sourcing replacement fuel, loss of profit, increased operational expenditure, or extra logistics costs. 

Depending on the terms of the contract, you may also be able to recover consequential losses, provided they are not expressly excluded. These might include loss of production, loss of business opportunity, or damage to equipment arising from the lack of fuel. 

Other remedies are available under English law, including the recovery of any sums already paid and interest. English courts take a strict approach to contractual certainty, and parties are not released from their obligations simply because performance has become unprofitable. 

If damages would not provide an adequate remedy, you may also consider seeking an order for specific performance. This would require the supplier to fulfil their contractual obligations. However, courts generally consider this remedy only after assessing whether damages are available and sufficient. 

2. Indexed or variable-price contracts

Many commercial buyers use indexed or variable contracts and under these mechanisms, price increases, even extreme ones, may be contractually permitted if they follow the agreed formula.  

3. Force majeure does not cover price increases

Price volatility caused by recent conflict, however severe, is unlikely to constitute a force majeure event. This principle was reinforced by the Supreme Court in the case of RTI Ltd v MUR Shipping BV. 

In that case, the parties’ contract contained a force majeure clause that suspended performance where it was “prevented or delayed” by events such as “rules or regulations of governments… [or] restrictions on monetary transfers”. The clause also required that the event “cannot be overcome by reasonable endeavours”. 

The Supreme Court confirmed two key points: 

a) Force majeure applies only where contractual performance is impossible, not merely moreexpensiveor commercially inconvenient.  

b) The obligation to use “reasonable endeavours” does not require a party to accept a fundamentally different ornon‑contractualmode of performance. 

Practical considerations for businesses

1. Review your supply contracts

Check: 

1. Is pricing fixed, indexed, or spot-based? 
2. Are there variation or re‑pricing rights? 
3. What are the cancellation provisions? 
4. Does the supplier have allocation rights during shortages? 

2. Preserve all communications

If your supplier: 

1. cancels an order; 
2. re‑quotes at a higher price;  
3. refuses to honour a previously confirmed price. 

Retain: 

1. emails, screenshots, delivery confirmations, and call notes 
2. evidence of alternative quotes  
3. timestamps of all correspondence 

3. Challenge improper cancellations

Where the contract does not permit repricing, send a formal notice asserting: 

1. breach of contract; 
2. reservation of rights; 
3. intention to pursue damages. 

4. Negotiate cautiously without waiving rights

If operational needs require compromise: 

1. agree to partial deliveries; 
2. agree temporary indexation; 
3. limit changes to a defined period. 

Always state that the business is not waiving any legal rights. It is also important to remember that a party alleging damages must take reasonable steps to limit its losses by mitigating its circumstances. If some part of the loss could reasonably have been prevented through compromise, the court will take this into consideration when assessing any award of damages. 

How can we support your business

Businesses affected by pricing disputes or supply disruptions may benefit from taking early legal advice, particularly where contractual obligations, pricing mechanisms, or potential losses are in question. 

Our Dispute Resolution team regularly advises businesses on contractual disputes, commercial risk management, and supply chain issues. 

Our team can: 

• review existing fuel or energy supply contracts; 
• assess whether a supplier’s cancellation or price‑increase is lawful; 
• draft formal challenge letters preserving your rights; 
• negotiate revised terms without undermining your legal position; 
• advise on damages, mitigation and recovery option; 
• draft future‑proofed commercial supply agreements to reduce risk exposure. 

If your business has received a sudden price increase, cancellation, or has concerns about supplier conduct in the current market, please get in touch with our Dispute Resolution team at Thompson Smith and Puxon. Our expert team can review your contract(s) and advise you on the options available to protect your interests.