Heating a Home: Gas, Oil or Propane?

Gas, Oil and Propane: A Brief Rundown
Natural gas, heating oil and propane are three different ways a homeowner might heat the home, or more specifically, to fuel the system that heats the home. There can be advantages and disadvantages to each, and no one can be considered the absolute "best." All three fuel types can be used for homes that have boiler or furnace heating systems.

Natural gas is a fossil fuel produced from oil fields and gas fields. Once processed, natural gas is typically brought to a residence via pipes controlled by a local distribution company. It is common to see natural gas measured in "therms" or hundreds of cubic feet (ccf). One therm is equal to 100,000 BTU (British thermal units), a unit of energy. Of the three heating fuels, natural gas burns the cleanest, which is an attractive quality to the environmentally conscious consumer. As natural gas gets piped into the home from a "main," it is always available (barring a rupture in the main) and never has to be refilled. "The high-efficiency gas boilers and furnaces have the highest fuel conversion efficiency out of the three," says Terry Townsend, former president for the American Society of Heating, Refrigerating and Air-Conditioning Engineers. A higher fuel conversion means less of the fuel is wasted. The biggest limitation on natural gas is accessibility; many rural and even suburban homeowners simply will not have access to a natural gas distribution company’s supply.

Heating oil is also called oil heat, #2 heating oil or fuel oil (#2). The "#2" refers to the specific class of fuel oil determined by viscosity and boiling point. Heating oil is a petroleum product and is most commonly used as a heating fuel in the Northeast. Heating oil used for residential application is stored in tanks that must be refilled, sometimes as often as 6 or 7 times during a heating season. Heating oil is measured in gallons. Heating oil burns 400 times hotter than natural gas and is often marketed as a safer method of heating a home. However, municipalities can have regulations in place concerning the installation of the storage tank and the homeowner responsibility in the event of a spill. "Spills are the biggest concern with oil," says Townsend. "Some towns will require a kind of moat around the tank, and the cleanup costs in the event of a spill may be the responsibility of the owner."

Propane used as a heating fuel is a by-product of the natural gas processing and petroleum refining industries. Although propane is a gas, it is stored under pressure in liquid form and is measured in gallons. Like heating oil, propane for residential heating is stored in tanks that must be refilled according to use throughout the year. Propane is a cleaner-burning fuel than heating oil and mostly produced domestically. Propane costs can fluctuate erratically. "Propane prices are volatile," says Townsend. "They are based on demand, and consumers may see a lot of peaks and valleys."

Heating a Home: Gas, Oil or Propane?

Fuel Cost and Other Considerations
When considering a switch in heating fuel, it is wise to examine the cost of that particular fuel. Fuel costs will vary by region, as the cost to transport the fuel affects the end-user prices. Everything from climate, drilling expansion and import levels can impact the bottom line. Fuel cost calculators, like the one available through the Energy Information Administration (EIA), determine prices for each fuel, and a frequently updated "Winter Fuels Outlook" provides consumers with projected fuel availability and average residential costs for the upcoming heating season.

Current national average residential rates show that natural gas costs $1.37 per therm, which can produce 100,000 BTU. One gallon of propane, which can produce 91,333 BTU, costs $2.52. A gallon of heating oil (138,690 BTU) costs $3.34. Another way of looking at those numbers is to determine how much it would cost for each fuel to produce 1,000,000 BTU, in which case the numbers come out: 1.) Natural gas: $13.70; 2.) Propane: $27.59 and 3.) Heating oil: $24.08. This calculation is adjusted according to the efficiency of the home’s furnace or boiler—a more efficient heating system will heat a home for less. By researching local rates for heating fuels, a homeowner can more accurately compare the costs of the three fuels. It is important to remember that rates will vary by region. For example, natural gas costs tend to be highest on the East Coast, while in the western states the costs can be below the national average. Since heating oil is predominant in the Northeast, prices may be kept lower due to competing suppliers.

When examining local suppliers, it is smart to look into purchasing plans and fixed-price plans. When provided, these options can help spread out heating bills evenly over the year and guarantee a "locked-in" rate that protects against sudden fluctuation in costs due to supply and demand factors. Availability can also be a potential issue for heating oil and propane customers. "A customer needs to know that in adverse weather conditions the supplier might not be able to make it out to refill," warns Townsend.

Converting Your System
Homeowners who have decided to switch fuels may have to convert their existing system. A good time to do this would be when upgrading an old boiler or furnace to a new, more efficient model. It is important to know all the upfront costs of making the conversion ahead of time as this will influence the overall cost-effectiveness of making the switch. As a general rule, it is easier to switch from propane to natural gas (and vice versa) than it is to switch from heating oil to propane or natural gas (and vice versa).

Conversion costs and methods will vary depending on what the homeowner is converting from and converting to. When converting to natural gas, the consumer must first determine if the necessary piping is in place to supply the home. In some cases, the local natural gas distributor will cover the costs of bringing gas from the main to the home, but this can depend on the expected gas usage. "If a homeowner is planning on using natural gas for heat and hot water, chances are the utility company will pay for the conversion and pipe installation," says Townsend. The same might go for potential heating oil or propane customers: the greater the expected usage, the more likely it is that the fuel provider will cover the conversion costs. It is best to get a consultation from the fuel supplier to determine what—if any—the the upfront conversion costs might be. In addition to free conversion, some companies will offer rebate incentives on the purchase of a new boiler or furnace.

Switching a home’s heating fuel should be a carefully planned and calculated move. The potential for savings over time may exist, but a homeowner should investigate every option and use all the resources available to make the right choice.

Credit: Renovate with Tommy Mac