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Personally and professionally speaking, I don't think its fair to tax oil used for heating homes (at least no more than gas or electricity is), as its not chosen instead of gas, but because there are no gas services in the area and that electric heating/hot water production has been (up until now) so expensive.
New(ish) technologies in providing heating/hot water for homes, such as ground or air-source heat pumps, solar hot water (more for larger homes with a higher hot water demand [larger families]) and biomass boilers can be, over the medium to longer term, a viable alternative to traditional heating methods, but each isn't a viable solution for every situation, quality & efficiency (and price - no guarantee that expensive = good) of kit varies considerably, as does the installation and maintenance quality.
For the uninitiated, it can be a minefield, especially when there are so many useless (and quite a few dodgy) firms offering so-called green technologies in this area, often promising ridiculously short payback periods or unrealistically high annual savings in bills, as well as selling cheap tat for £££ or promising government grants/feed-in tarrifs to offset installation costs and sweeten the deal that either no longer exist or don't bring in much money.
More generally, government policies towards fossil fuel use, whether it be in conjunction with motor vehicle use, heating/hot water production, aircraft/ships etc, they should encourage firms to come up with new technologies (giving tax breaks for useful technology), and once proved (even if still being developed, e.g. fuel cells, hybrids, combined heat & power etc), then should slowly encourage its use and discourage older, less efficient/more polluting forms of fuel/technology by the tax system.
What they shouldn't do, as the Labour government (and many other EU governments did) around the late 90s - early 2000s was to ignore the science (the NOx/particulates information was apparently there, as well as proof about diesel's poor efficiency in town/short distance driving) and pretend to be green by just concentrating on CO2 emissions figures produced in lab conditions, not in the real world.
I personally think the taxes should be retrospective (i.e. changes effect existing users) to a degree, though not to the extent that new ones should be. Using the real-world emissions figures as a basis would be a good starting point - some cars (for example) which on the surface look 'greener' (say) than older ones are in reality not, yet they get taxed at half the rate.
In addition, people should not believe the (previous) 'wisdom' of buying diesel cars just because they (under the 'lab' tests) are supposedly far more efficient than petrol-engined cars, whatever the usage pattern. If you lug heavy loads regularly or do 20k miles or more of mainly out-of-town driving, then fine, get a diesel, however, mixed use under that (no heavy loads), then get a petrol-engined car, similarly get a hybid for mostly town use (or just use public transport and hire an appropriate vehicle for longer journeys that can't be taken easily by public transport/other).
Not exactly rocket science. Then again, we are dealing with MPs and many people who (in my opinion) act as that minicab driver did (see other thread) yesterday deliberately driving into 6ft+ of water in London.
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