New York Harbor heating oil prices in the cash market, which reflects wholesale prices, jumped some 10 percent to hit $1.15 a gallon on Thursday after a government report showed a steep fall in stored fuel supplies last week.
"It's going to be a domino effect -- high differentials increase costs to suppliers, which increases costs to consumers," said John Maniscalco, executive vice president of the New York Oil Heating Association.
Residential heating fuel prices have already risen to $1.54 per gallon, up some 27.9 cents per gallon since October, the Energy Information Administration (EIA) said on Wednesday. Prices are 37.2 cents per gallon higher than last year at this time.
"It's not just an oil crisis, it's an energy crisis. Whether you use heating oil or natural gas, you're going to have to pay more," Maniscalco added.
Fuel supplies were depleted in recent weeks as an Arctic blast in the U.S. Northeast stoked heating demand in January. A two-month strike in Venezuela has also cut exports from a country which usually supplies 13 percent of U.S. crude and refined product imports.
U.S. refiners have cut back production as the lack of supply edges crude oil prices close to their highest level in two years, slashing profit margins on oil products. Government data indicate crude oil input into U.S. refineries has fallen 1.2 million barrels per day in the last three weeks.
New England supplies of distillate fuel, which include heating oil, were 39 percent below the five-year average as of Jan. 31, the EIA reported.
In the mid-Atlantic region, which extends south from New York to Maryland and Delaware, distillate supplies are 17 percent below five-year averages.
The New England Fuel Institute, which represents more than 1,100 heating oil companies, said on Thursday it will ask the U.S. Department of Energy for a release of emergency reserves due to tight heating oil supplies.
"Whether you call it a crisis or a concern, whatever label you give it, prices are high and stocks are low," said EIA senior oil market analyst Doug MacIntyre.
Demand for distillate fuels has also risen as prices for alternatives such as natural gas creep higher. Utility companies buy heating oil and harder-to-produce jet kerosene to run power plants when natural gas prices become prohibitively expensive.