In North America, the use of home heating oil is concentrated in northeastern United States and eastern Canada, due in part to a relative lack of penetration in the region by natural gas distribution systems as gas pipeline capacity into the Northeast is limited. In the United States, 8.8 million households used heating oil to heat their homes and hot water in 2001, with total heating oil expenditures of approximately $5.7 billion. While households mainly consuming residential heating oil accounted for only approximately 8% of heated households nationwide in 2001, households in New England accounted for approximately 31% of all heating oil consuming households in the United States that year. In New England, approximately 50% of households consumed heating oil as their primary source of heating energy in 2001, 35% burned natural gas and 9% used electricity.

The U.S. heating oil distribution industry is mature, with total annual demand expected to remain relatively constant. The business is seasonal, and sales will fluctuate with most sales occurring in the winter, the first and fourth quarters of the calendar year when weather is coldest. Diesel, or low-sulfur distillate, is used as transportation fuel both on and off highway. In 1993, the Environmental Protection Agency mandated legislation limiting the allowable content of sulfur in diesel fuels for on-highway applications. As of December 2004, between 50% and 60% of diesel is supplied from sources in the U.S. Gulf Coast. Transportation demand for diesel is expected to continue to grow in the future, necessitating increased import volume and increased U.S. capacity. In 2003, the New England region saw sales of approximately 25.2 million barrels of on-highway diesel, representing about 2.9% of total U.S. sales.

The United States consumes over 20 million barrels of refined petroleum products each day, almost half of which is gasoline used for transportation purposes. The primary use for gasoline is in automobiles and light trucks. It also fuels boats, recreational vehicles, and various farm and other equipment. There are three main grades of gasoline: regular, mid-grade, and premium, each with a different octane level. In 2003, U.S. refineries produced approximately 94% of the gasoline used domestically.

Distillates are further divided into home heating oil, diesel and kerosene. The Company sells generic home heating oil and Heating Oil Plus®, its proprietary premium branded heating oil. Heating Oil Plus® is electronically blended at the delivery facility and is designed to reduce fuel related service calls by reducing the problems associated with today's fuel quality, such as plugged nozzles and clogged filters and pump screens. The Company sells generic diesel and Diesel One®, its proprietary premium diesel product, to unbranded motor fuel stations, diesel-consuming truck fleets and other end users. The Company also has the ability to blend diesel according to customers' specifications. Diesel One® is formulated to achieve consistent, high quality fuel performance with the following benefits for all diesel engine applications: better fuel quality, increased horsepower, lower maintenance costs, longer engine life and maximum cold weather operability.

The Company sells grades of unbranded gasoline that comply with seasonal and geographical requirements in the areas in which it markets. The Company has the ability to blend gasoline, and it sells conventional gasoline and ethanol blended gasoline in the markets that require such products.

The Company is one of two primary residual oil marketers in New England. The Company specially blends bunker fuel for users in accordance with their individual power plant specifications.

In the Wholesale category the Company sells home heating oil, diesel, kerosene, unbranded gasoline and residual oil to wholesalers, retailers and commercial customers. Generally, customers use their own vehicles or contract carriers to take delivery of the product at bulk terminals and inland storage facilities that the Company owns or controls or with which it has throughput arrangements.

The Company’s Commercial category includes sales of home heating oil, diesel, kerosene, unbranded gasoline and residual oil to customers in the public sector through competitive bidding and to large commercial and industrial customers. The Company’s Commercial category also includes custom blended residual oil and distillates delivered by bunker barges or from a terminal dock. In addition to these products, this category includes sales of a small amount of natural gas which is delivered through a pipeline.

For the year ended December 31, 2004, operating expenses increased by $0.8 million, or 4.3%, to $19.6 million. as compared to the year ended December 31, 2003.

For the year ended December 31, 2004, selling, general and administrative expense increased by $3.0 million, or 11.0%, to $32.5 million as compared to the year ended December 31, 2003.

For the year ended December 31, 2004, depreciation and amortization expense increased by $0.8 million, or 33.3%, to $3.2 million as compared to the year ended December 31, 2003.

For the year ended December 31, 2004, interest expense in 2004 increased by $2.7 million, or 134%, to $4.7 million. as compared to the year ended December 31, 2003.