Home / Blog / Cost Comparison: Gas vs. Oil vs. Electricity, Part 3

Cost Comparison: Gas vs. Oil vs. Electricity, Part 3

June 24, 2013 | Posted by Mitt Jones

In Part 1 of this article, we calculated the approximate prices below for three popular types of heating fuel:

Cost of natural gas = $1.10 for 100,000 BTU
Cost of electricity = $2.93 for 100,000 BTU
Cost of heating oil = $2.50 for 100,000 BTU

In Part 2, we settled on a representative figure for the heating load of a moderate-size house in the Portland metro area with so-so insulation. You might need to add 60,000,000 BTU of heat per hear to this house to heat it adequately.

To finish out our comparison of the cost of heating with gas, oil, and electricity, we also need to talk about the efficiency of the equipment itself.

With gas, plenty of affordable models heat with an efficiency of 90% to 97%, though 80% AFUE models are still available. For comparison purposes here, let’s us an efficiency of 90% with gas. Here is how we calculate the cost of heating our representative house with natural gas:

Annual energy required with natural gas = 60,000,0000 BTU / 0.90 = 66,666,667 BTU

Annual cost with natural gas = 66,666,667 BTU * $1.10/100,000 BTU

Annual cost with natural gas = $733

If you heat with oil, you may have an old burner that operates at 70% efficiency or worse, but newer models boast efficiencies above 85%. Let’s go with 80% for oil.

Annual energy required with oil = 60,000,000 BTU / 0.8 = 75,000,000 BTU

Annual cost with oil = 75,000,000 BTU * $2.50/100,000 BTU

Annual cost with oil = $1,875

Things really get interesting with electricity, thanks to the heat pump. With electrical resistance heating such as wall heaters and baseboard heaters, you can assume an efficiency of 100 percent.

Annual cost with electrical resistance heating = 60,000,000 BTU * $2.93/100,000 BTU

Annual cost with electrical resistance heating = $1,758

With electric heat pumps, efficiency is actually well over 100 percent, thanks to a clever use of thermodynamics. (That’s a blog post in the making, but the short explanation is that heat pumps are so efficient because they move heat from one place to another rather than generating it from energy.) Ductless heat pumps can approach 300 percent efficiency, but to be conservative, let’s run the numbers using an efficiency of 250%.

Annual energy required with ductless heat pump = 60,000,000 BTU / 2.5 = 24,000,000 BTU

Annual cost with ductless heat pump = 24,000,000 BTU * $2.93/100,000 BTU

Annual cost with ductless heat pump = $703

Ranked from less expensive to more, then, here’s where we ended with annual heating costs for our representative moderate-size, mid-efficiency Portland home:

Electricity with ductless heat pump:           $     703
Natural gas with 90% AFUE furnace:           $     733
Electric resistance heating:                              $ 1,758
Oil with 80% AFUE burner:                               $ 1,875

Now we have a pretty good comparison of the cost of providing 60,000,000 BTU of heat with two types of electric equipment, a 90% AFUE gas furnace, and an 80% AFUE oil furnace. Continue on to the final installment of this article—Part 4—for some final thoughts about applying this information in the real world. 

Join The Discussion

Posted by Don on
Looking to install a heat pump. Currently heating with a oil fired 10 year old hot water boiler. Contractor says electric back up is more efficient than oil. Do you agree?
Posted by Mitt Jones on
Hi, Don. The scenario you mention brings a few questions to mind about your specific situation. For instance, am I right to assume that you heat with hot-water radiators now? If so, are you adding a ductless heat pump or installing a duct system along with a conventional, unitary heat pump?

Regardless, to answer your question: Based on the analysis we walked through here, electric resistance heating should be marginally less costly to operate than an 80% AFUE oil-fired heat source, and strictly speaking it would also be more efficient. Also, the oil-fired system would require maintenance that electric resistance backup heat would not.

That said, there is expense and energy use involved any time you replace a piece of equipment. If there is a practical way to use your existing oil-fired system as a backup heat source and if you like the idea of keeping it, then that’s a perfectly valid choice.

Hope this helps. -- Mitt
Posted by Nick on
The gas and oil options also have an extra cost which is the electricity used to run blowers (for forced air systems) and pumps (hydronic systems). This extra cost isn't huge but it does add up to something worth considering and could be pivotal in the gas-vs-ductless comparison.
Posted by Mitt Jones on
Hi, Nick. The air handlers definitely use some energy, which is not factored into the efficiency ratings. On the other hand, this energy use would have to be factored in for conventional, unitary heat pumps, electric forced-air furnaces, gas furnaces, or oil furnaces, so it's a common additional cost.

Unitary heat pumps need to move more air across the heat exchanger to deliver the same amount of heat, and with today's high-efficiency, ECM fan motors, having to push more air results in significantly higher power requirement, so adding the energy usage of the air handler impacts unitary heat pumps more than the other choices. If you're heating with a furnace older than about 10 years or so, your system likely still uses a PSC fan motor, which uses a good bit of energy regardless of the required airflow.

We'll address air handler energy use in a future blog post -- there is a lot to discuss here -- but an ECM fan motor in a typical residential gas furnace might use 80 to 100 watts of power when the furnace is on. It's not a huge additional expense, but it's there.

Thanks for posting your comment!
Posted by Rob on
Hi Mitt,

I appreciate this blog and the data you've posted, but I'm very curious about historical price data. I was on a local oil delivery company's web site, and they claimed that oil heat has been cheaper than natural gas for home heating for 5 of the last 7 years. Of course, I understand they have a huge bias, but I'd love to see the facts for myself. Maybe a longer term set of data would be nice to look at. Do you have any light you can shed on the subject? My googling is not revealing too much. I did find some historical prices on the eia web site (http://www.eia.gov/dnav/pet/pet_pri_wfr_dcus_nus_w.htm), but it's not quite what I want. (It doesn't give price per BTU, for one thing, but rather per gallon.)

Much appeciated,
Posted by Mitt Jones on
Hi, Rob. I don't know of another source for historical data. Maybe one of our readers will chime in a with a good suggestion. It sounds like there are more issues for you with the EIA data than pricing units, but in case this helps a gallon of oil equates to roughly 140,000 BTU.

Thanks for posting your question1
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I am trying to figure out whether to go with electric or propane? I have both on the property. I have done the research on both and can't make up my mind, for long term???? HELP...

Posted by fatemeh on
Posted by th on
Your 9 cents/Kwh is before obama, it's close to double that in the largest populated areas, for most people resistance heat is the worst choice by far, ductless and cold climate heat pumps are expensive up front and many heating contractors except for the northern US actually discourage their use.
Posted by richard on
Just came across your artcle. I am contemplating purchasing a house that has electric heat plus a pellet stone on each of the two floors. The house is 5500 sq feet and actually used to be a chuch but has been modified slightly. The living room has tall cathedral ceilings. Any idea on how to calculate costs to heat this house? It is in upstate New York.
Posted by SS on
Richard, That is going to be very expensive to heat. You will definitely want to install a better heating system. Is there a natural gas line nearby? If not, then your best bet will be to invest in a geothermal heating system. This will be very expensive but payback over what is currently there ($30-60K). You will most likely want to better air seal and insulate the building as well.
Posted by Dee Dub on
We pay just over $0.14/KWHr for electricity in VT. According to http://www.rapidtables.com/convert/energy/kWh_to_BTU.htm, it tales approximately 29.307107 KWHr to make 100MBTU, or $4.35. Quite a difference from the number you have.
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We are trying to research the cost of changing from oil to gas. Not sure how to go about it, we need some help to determine costs of the equipment for gas, and the cost of changing the current oil burner.
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Hi How are You
I have a geothermal well heat axchanger forced hot air
Heating system. We're what is the best propane or oil
to Integrate or combine the systems together? What are the overall savings in the long run? Oil or Propane?
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Hello Mitt Jones:
This blog seems like the place to help me out with my local Portland heating issues. I have a home in SW Portland that was built in 1951. No wall insulation, attic insulation is not too bad. Heat is provided by original ThermoPride fuel oil furnace. In January of this year, I went through a full tank of 275 gallons of fuel oil. Current cost = $2.46/gallon.

I'd like to switch to natural gas. However, Northwest Natural Gas tells me that this property is "at the end of the line" for natural gas service, and that for them to extend the line, it will cost me in excess of $11,000 to bring service up to the house. That says nothing about the cost of a new gas furnace, etc. Neighbor across the street says the same thing, and both of us would like to have natural gas service connected. I'm estimating that total cost of new furnace, extending the "line" etc., would possibly cost me $25,000.

What's your recommendation for me PLEASE???!!!
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