Oil Heat is becoming Very Expensive
Home                                                         onewiseman.com                                                      Published 4/24/08
At one time, heating your home with fuel oil ("oil heat") was quite economical. Heating with natural gas has generally been the most economical, but the gas is not available in outlying areas. LP or Propane gas, has usually been somewhat more expensive than oil, and heating with electricity has usually been the most expensive method. Using an electric "heat pump" can bring the cost of heating with electricity down considerably, sometimes comparable to natural gas.

This year, the cost of heating with oil has actually surpassed the cost of heating with electricity!

A gallon of #2 fuel oil contains about 140,000 BTU's of heat. Most oil furnaces used in homes have an efficiency of about 80%. In other words, when you burn that gallon of oil, 80% of it's heat (112,000 BTU's) goes into your home, and 20% (28,000 BTU's) goes up the chimney and is wasted. If the furnace burns 1 gallon over a period of one hour of running time, it can be said that when that hour ends, it has produced 112,000 BTU's of useable heat per hour, or 112,000 BTU/HR.

$3.70 is the cost of a gallon of oil right now, which will buy you 112,000 BTU's of useable heat.

One watt of electricity can produce 3.41 BTU's of heat. Heating with electricity is, for practical purposes, considered 100% efficient. There is no loss up a chimney. So to get the same heat we get from a gallon of oil (112,000 BTU's), we can divide 112,000 by 3.41, which equals 32,845 watts, or 32.85 kilowatts. If we use 32.85 kilowatts of electricity for one hour of run time, at the end of that hour we have produced 112,000 BTU's of heat, the same as the gallon of oil. Electricity is sold by the kilowatt-hour (kwh) meaning the use of 1000 watts, for a period of one hour. In this case, we have used 32.85 kilowatts of electricity for one hour, which equals 32.85 kilowatt-hours.

11 cents is the average cost for a kilowatt-hour of electricity. So 32.85 times 11 cents = $3.61, which is your cost for 112,000 BTU's of useble heat, compared to $3.70 for the oil.

In other words, if electricity is about 11 cents per kilowatt-hour, when oil is over $3.61 per gallon, it's cheaper to run an electric heater. (Note that electricity may be subject to sales taxes, while other  fuels may not.
Keep this in mind when comparing prices. A 5% tax added to the $3.61 shown above increases it to $3.79, now it's more than the gallon of oil.)

An electric "heat pump" which concentrates heat that already exists in the air or the ground, can deliver about
3 times the heat per kilowatt-hour used, compared to the straight electric heat described above. This should give you the same112,000 BTU's of useable heat for only about $1.20!

Of course the prices shown here for oil and electricity are current prices in Wisconsin. Before considering any major changes to your heating system, it is wise to check local prices. Electricity rates are on the rise, but so far, not as fast as oil or propane. And it's possible (although unlikely), that oil prices could drop substantially, making it a better value. You can substitute your costs for oil and electricity in the equations shown, then recalculate to find out what's best for you.

For calculating the cost of other fuels:

Natural gas is sold by the "therm" or 100 Cubic Feet (CCF) which contains about 100,000 BTU's of heat.

Propane or "LP" gas is usually sold by the gallon, which contains about 92,000 BTU's of heat.

Both natural gas and propane furnaces are available in efficiencies up to about 95%, meaning you could get about 95,000 BTU's per therm for natural gas, and about 87,400 BTU's per gallon of propane, of useable heat.

Heating oil is basically the same thing as Diesel fuel. The main difference is that Diesel is subject to road taxes, just like gasoline. Heating oil is often dyed a red color, to indicate that the tax has not been paid on it's purchase. This discourages circumventing the road tax by filling your truck with heating oil from your home tank. Apparently someone actually looks for this now and then??
If you know what the road taxes are on a gallon of fuel in your area, you can approximate the price of a gallon of heating oil by simply subtracting the road tax from the posted Diesel fuel prices. As fall rolls around, you'll have an idea of the oil price going into the heating season!

Related stories on this site include
<furnace> , <furnaces> , <heater> , <filters> , and of course, check out the <home> page too!