Comparing Heating Oil vs Propane for Home Heating

heating oil vs. propane

Comparing Heating Oil vs Propane for Home Heating

When you ask around for advice on the type of fuel you should choose for your home furnace, you may soon discover that no one can give you a straight A or B answer. That's because there are many different factors involved in calculating the price of heating your home. Believe it or not, the actual unit price of each type of fuel can turn out to be a minor factor in your calculations.

There are six basic players in the home heating game:

  • Coal
  • Wood
  • Electricity
  • Heating oil
  • Natural gas
  • Propane

Narrowing your options down to two candidates brings you closer to making a decision. For example, if you've narrowed your decision to heating oil vs propane, it's time to focus on the relative merits of these two heat sources. Read our guide to oil vs propane to help you calculate the costs of each type of heating fuel.

Working through your own costs will enable you to make an informed investment.

About Heating Oil

Oil comes from petroleum, and crude oil gets refined into a variety of products. Heating oil is not the same refined oil you put in your car. You know that diesel is different from regular gasoline. Well, heating oil is another type of fuel as well.

Gasoline is a highly volatile, lightweight fuel that evaporates quickly. Gas stations post warning signs about switching off your engine and not smoking in the area, and they tell you to be wary of fumes. These alerts illustrate the dangers of gasoline and show that it wouldn't be very safe to store tanks around your home.

Diesel is heavier than gasoline, and heating oil is heavier still. The type of heating oil that home furnaces use is different from the type used in power plants. The power plant oil is the heaviest of all, while home heating oil is considered a middle weight distillate, and it’s only a little heavier than diesel.

Gasoline automobiles have the reputation of being quicker to accelerate, while diesel vehicles are known for their fuel efficiency. The cost-efficient properties of diesel explain the prevalence of diesel-fueled generators over those that are powered by gasoline. Diesel and fuel oil have similar energy properties. As fuel oil is a little heavier than diesel, it is even more efficient. Heating oil was specifically formulated to run furnaces at a better efficiency than gasoline or diesel. This is why home heating systems use heating oil instead of gasoline.

About Propane

Oil is a liquid, but propane is a gas. Liquids are fluid, like water, but gases seem to have no visible appearance, like air. Gas is a general term for air-like substances, but there are specific gases that can be ignited and used for heating. You can choose between natural gas and propane for your home heating system.

Many people get confused between natural gas and propane. It's important to get to know that natural gas and propane are not the same thing.

Propane is extracted from natural gas. Although "natural" implies that the gas is naturally occurring, it has to be processed before it gets to your furnace. Natural gas is a mixture of gases, but it's mainly composed of methane, which is given off by rotting vegetation. Other gases in that mix include butane, ethane, pentane and propane. These other gases can all be used to create fire; for example, cigarette lighters contain butane. However, a mix of those volatile gases flowing into a furnace is difficult to control, and not all natural gas comes out of the ground with its components in standard proportions. So, "naturally occurring gas" is processed in order to be classified as "natural gas."

propane heat producer

The properties of propane make it a much better heat producer than natural gas. You should expect propane to be more expensive per cubic foot than natural gas, because you need a lot less propane than you need of natural gas in order to produce the same amount of heat.

Comparing Fuels

Of the liquid fuels available to the consumer, heating oil is by far the most efficient. Propane is more efficient than natural gas. So when choosing a champion liquid heating fuel, it is easy to spot the winner, as it is with the gases. However, when comparing the King of the Liquid Fuels with the Queen of the Gases, the energy industry throws a complicating factor into the ring. Liquids and gases are not expressed in the same unit of measure.

Gasoline, diesel and heating oil are measured in gallons. A little more chaos is introduced into the mix if you read the handbooks of equipment made in Europe – they use liters to measure liquids. If you're faced with that complication, you will have to do some adjustments to the numbers your furnace guide tells you. A gallon is bigger than a liter – one gallon is the same as 3.79 liters.

Gases are measured in cubic feet. Again, some furnace manufacturers use the metric system when they explain fuel supply. In the metric system, the unit used for gases is the cubic meter. In this instance, the metric unit is bigger than the Imperial unit. One cubic meter equals 35.3 cubic feet.

Unit Conversion

If you want to convert cubic feet to gallons, you have more problems on your hands. Gas expands with heat and is usually transported and contained under pressure, which reduces its cubic capacity. Therefore, a quantity of gas will calculate out to a different sized gallon container, depending on the temperature and the pressure it is subjected to. Fortunately, there is a set of standard assumptions that the industry uses when calculating the conversion of a cubic foot of propane into gallons:

  • One gallon of propane equals 35.97 cubic feet
  • One cubic foot of propane equals 0.0278 gallons

These conversion factors mean you really need to be a wiz with the calculator to get a direct comparison of a quantity of heating oil to a quantity of propane. If one of the elements in the comparison is expressed in metric units, that conversion is going to get even more complicated.

Thermal Properties

Converting your gallon of heating oil into cubic feet isn't actually going to help you decide which of the two fuels is the most efficient. One gallon of heating oil and 35.97 cubic feet of propane do not produce the same amount of energy. This is because the two substances have different thermal properties. One produces more heat with less quantity than the other.

The heating industry applies a standardized unit of measure to express the thermal properties of fuel. This is called the British thermal unit, which you will see denoted as BTU. The heating properties of propane and heating oil are:

  • 2,546 BTU/cubic foot for propane
  • 140,000 BTU/gallon for heating oil

Of course, a gallon is a bigger quantity than 1 cubic foot. To get a better comparison, you need to convert the BTU figure for propane into BTU/gallon. That gives:

  • 91,600 BTU/gallon for propane
  • 140,000 BTU/gallon for heating oil

Fuel Efficiency

There is one more factor that needs to be taken into account when judging propane vs oil – fuel efficiency. Gas furnaces (both natural gas and propane) convert a higher proportion of their fuel supply into heat than oil burners do. Comparing brand new furnaces, you should expect to get a fuel efficiency of between 89 and 98 percent for propane and between 80 and 90 percent for heating oil.

Assuming you compare the most efficient furnace of each type, you can adjust the relative heat production of the two forms of heating fuel:

  • 91,600 x 98 percent = 89,768 BTU/gallon for propane
  • 140,000 x 90 percent = 126,000 BTU/gallon for heating oil

Even adjusting for efficiency, heating oil still produces more heat per gallon than propane.

The comparison thus far has focused purely on the amount of heat equivalent amounts each fuel produces. The decision on whether to choose propane vs oil heat is greatly influenced by the high price of propane heating systems and the higher cost of home heating oil.

Price Factors

The price of heating oil and the price of gas do not stay static. There are various pricing factors that can make a big difference in the relative cost of either system. The price of natural gas has been falling steadily in the US over the past few years. The price of oil has risen sharply and fallen dramatically several times so far this century.

propane vs oil costs graph

As a general rule of thumb, propane is cheaper per BTU than heating oil. However, seasonal factors and location also play a role. The oil industry shuts down its refineries in stages between March and June every year for maintenance. This event causes an annual price rise in all forms of oil in the spring. Industrial action by workers needed for processing or shipping either oil or gas can also alter the relative cost of either fuel.

Propane heat costs and oil heating costs vary depending on the delivery location. Some states have higher propane prices than others, because of shortages. Other states may impose environmental taxes on oil, making it more expensive.

The cost of transporting the propane to depots in your area and on to your home can mean your cost considerations will be radically different to the oil vs propane heat costs in other neighborhoods.

The only way you can get a proper price comparison in your oil vs propane furnace decision is to get the precise costs that will apply to your home for each fuel type.

Establish a Baseline

If you already have a furnace, you need to make a decision on whether to keep it or replace it. Furnaces become less efficient as they age, and maintenance costs of aging equipment add to the cost of heating your home. If you have an old oil furnace you will save money on your energy bills simply by buying a new oil furnace. Similarly, just replacing an old propane furnace with a new one will reduce your fuel bills. However, you need to get a quote on removing your old boiler and installing the new one, and then add that to the total cost of replacement. If you simply can’t afford to buy a new furnace, you should also find out the financing costs of a purchase and add that to your calculations.

You can get a fair idea of how much your old furnace costs to run by adding up all the maintenance fees and the fuel bills over the previous three years. Then divide that number by three. This will give you an average cost per year, so you won't be calculating with figures for an exceptionally warm or cold winter. However, you should use that baseline to work out whether replacement of your boiler is worth the money. Don't compare the costs of your old oil furnace with the costs of a new propane system. Note your existing costs and then add up the price of a new oil system and a new propane furnace.

If you are building a new home, you have more options available to you. Sometimes the cost of re-ducting for a furnace with a different fuel system can make the decision to switch fuel types uneconomical. Even if you already have the records of your old heating costs, it is worth measuring the rooms you want to heat and calculating the right-sized furnace for your home. Your existing system may be bigger or smaller than necessary.

Calculate Requirements

Follow these steps to work out the size of furnace you will need:

  • Measure all the rooms you intend to heat, taking account of alcoves and bay windows.
  • Add together the square footage of all rooms.
  • Multiply your floor area by your heating needs to get your total BTU requirement. The amount of BTUs of heat you need depends on the type of climate in your region. Old homes in New England need 60 BTUs per square foot and new homes need 50 BTUs. In warmer areas of the country, you would only need 30 BTUs per square foot for a new house and 35 BTUs for an old one.

Calculate Capital Costs

Shop around for prices on oil furnaces and propane furnaces. Look for the following information about each furnace:

  • BTU per hour input, which will be written as BTU/h
  • The efficiency rating, written as AFUE (annual fuel utilization efficiency)
  • Recommended lifespan.
  • Unit price
  • Financing costs

Make sure you only consider furnaces where the BTU per hour divided by the AFUE is equal to or slightly greater than your BTU needs.

Get quotes for the installation of each furnace you priced. If you already have a furnace, also get the cost of removal.

Divide your findings into oil-fueled and propane-fueled groups. Note the total installation costs, plus the purchase price, plus the financing costs of each. Then divide that number by that unit's serviceable years. Pick the best priced furnace from each group.

heating oil stat

Calculate Fuel Needs

You now need to work out how much fuel each of your champion furnaces will use each year. Reckon on running your furnace for six months of the year in New England – from the beginning of October to the end of March. Perform the following calculation for each furnace.

  • Divide the BTU per hour by the AFUE expressed as a decimal (ie 80% = 0.8).
  • Multiply the result by 24, then by 180.
  • Divide the propane furnace total by 91,600.
  • Divide the oil furnace result by 140,000.

You now have the total amount of fuel in gallons for each fuel type. Multiply the propane result by 35.97 to get the fuel requirement in cubic feet.

Research Fuel Prices

Check out the Shipley Energy price quote system to get a quick estimate of the price of both heating oil and propane. Or you can contact us and explain your project to one of our energy advisors. He or she can help you with your calculations. If you don't want to speak with anyone, you can fill out the message form.

Finalize Comparison

To complete a comparison of oil furnace costs with propane furnace costs, follow the last few steps:

  • Multiply the oil furnace annual fuel consumption by the Shipley Energy heating oil price.
  • Add the running cost to the capital cost for the oil furnace.
  • Multiply the propane furnace annual fuel consumption by the Shipley Energy propane price.
  • Add the running cost to the capital cost for the propane furnace.

Now you have an exact comparison of the costs of running an oil furnace and a propane furnace in your home. You can fine tune your estimates by adding in prices for annual maintenance costs for each type of furnace. We offer a protection plan for your equipment, and we can also give you a quote to install your new heating system.