Oil vs. Natural Gas: Home Heating Cost Comparison

You are a homeowner that uses oil as your home heating source. Recently, the Gas Company has contacted you with an option to switch because you now have a pipeline in your area.  What should you do? First, you should get all the facts. Make sure you understand the full picture before making any decisions. Cost is one of the reasons that you are probably considering it in the first place, so lets start there.  Below is a direct cost comparison to take into consideration when you are looking to switch.


# 1 Installation



Switching from an oil heating system to a natural gas heating system could cost homeowners upwards of $10,000+. Here’s a breakdown:

  • Installing a gas conversion burner on an existing oil furnace (possible on newer models) – around $2,000
  • Switching to a whole new system (necessary for most older oil furnaces) – around $5,500
  • Hookup from road to the house – around $1,500
  • Hiring a contractor to connect it in side – around $1,500
  • Switching to gas may require you to line your chimney – around $2,000
  • Remove old oil tank – anywhere between $1,000 for above ground to $3,000 if it's buried


Staying with your current oil heat system? Here’s what you could be looking at for a breakdown, if your current system is outdated or needs replacement:

  • Average replacement furnace (if needed) – around $1,500 - $2,000
  • Average installation (if needed) – around $50-75/hour depending on your area, for a high-efficiency oil furnace it may cost you around $4,500 for the full installation from a professional

If you’re looking to save money in the long run, consider the overall costs of the installation and what is required. The investment to switch to natural gas may be tough to recuperate costs, especially with oil prices staying low.  


#2 Cost of Fuel



According to the U.S. Energy Information Administration, over the last 5 years Gas prices for Maine residents have fluctuated between $12 - $25+/thousand cubic feet. Directly comparing this price with oil can be tricky, as both are sold in very different units. Each fuel must be priced by 100,000 BTUs of energy.  


The U.S. Energy Information Administration also reported that residential heating oil prices over the last few years ranged from $2 - $3.90+/gallon. More recently they’ve dipped to under $2/gallon and are expected to stay at an all-time low. More efficient oil heating systems paired with homes that have better insulation allow residents to achieve the same amount of home heating by using 40% less fuel.

Also important to note is the increase in more fuel-efficient cars and the effect on gas prices. With the demand for gasoline declining, U.S. stockpiles are at their highest level in over 80 years. This over abundance of supply -- and little demand -- means that prices will continue to remain low for years to come.


#3 Maintenance



A gas furnace tune-up could cost you around $150 - 200 yearly, which would include materials, labor, supplies, transportation, setup and take down. In some cases, natural gas companies only come if there's a problem and don't offer regular tune-ups. Maintenance on a gas furnace could be done by the homeowner, but is not recommended, as there are many safety issues that come into play. It's best to leave the maintenance and repairs to the professionals.


A yearly oil heat furnace tune-up could cost you around $150, if it's not already included in your contract with your oil provider. Tune ups aren't required, but could save you in the long-term. A tune up and cleaning could reduce the risk of heating failure. It's best to have your furnace tuned up before the heating season begins. You wouldn’t want your heating to go out in the middle of the night during peak heating season.

The cost of regular maintenance is roughly the same for both furnaces, but it is recommended that you have your furnace inspected, cleaned and tuned-up annually to ensure a reliable heating system and longer-lasting furnace for years to come.


Depending on the price of oil, the overall cost of maintaining and heating your home is roughly the same for gas and oil over the heating season. The biggest difference you may face is in the initial switch from an oil to a natural gas system. Keep in mind that newer systems will be an easier transition, but it still could cost a homeowner upwards of $10,000 to make that switch.  Homeowners need to be aware of these initial costs and be willing to take that risk that they will recover those costs in the coming 10-20 years. If oil prices remain low, that would be hard to do.