Last winter, heating a house with oil cost an average of $1,700, while natural gas averaged less than $900, according to the US Energy Information Administration. The year before, when oil prices peaked, oil heating cost an average of $2,000; natural gas was again around $900. Since 2002, oil heat has averaged 30% to 50% more than gas every year.
So, if it's time to replace your old oil-burning system, you might be wondering if it makes sense to switch. Here's how to crunch the numbers.
What Fuel Types Are Available in Your Area?
About half of the country uses natural gas already, and only about 8% uses oil. Most of the rest use costlier heating — electricity accounts for 34%, propane 6% — typically because that's what is available locally. The vast majority of oil-burners are concentrated in the Northeast, where they account for 31% of residential heating systems. That's largely because of the region's proximity to the ports where oil barges deliver their loads and the fact that oil was a cheaper option back when these houses were built.
Unlike oil, which gets delivered by truck, natural gas gets piped right into your house by a utility company. So making the switch requires having a gas main under your street. Even in oil-dominated neighborhoods of the Northeast, most urban and suburban areas have gas lines. If yours doesn't, you may be able to convince the local utility to install a gas main if enough neighbors band together to make the request.
How Much Will the Equipment Cost?
Gas-fired equipment costs less than oil-fired gear. For a basic furnace (for a forced air heating system) or boiler (for hot-water heat), you'll pay around $1,500 to $3,000 for gas and $2,000 to as much as $8,000 for oil, says Ellis Guiles of TAG Mechanical in Syracuse, New York. If you select a high efficiency system, you'll pay $3,500 to $5,500 for gas, compared with $4,500 to $10,000 for oil. A high-efficiency unit of either kind may be eligible for a tax credit of up to $300, as well as local incentives.
How Much Will the Hookup Cost?
There are two aspects to the connection process for gas: outside the house and inside. The utility company will run an underground pipe from the gas main to your house, where it will install a meter. This requires using a backhoe to dig a trench from the road to the house and typically costs $1,000 to $1,500, according to Jim Ranfone, managing director of the American Gas Association, a trade group. But it's possible that the utility will waive or reduce that charge as an inducement to add you to its customer rolls. Your contractor will handle the second part of the job, piping the gas from the meter to your heating plant, typically at a cost of $500 to $1,000.
What Other Expenses Are Involved?
Switching to gas may require you to line your chimney ($750 to $2,000), because the moisture in gas exhaust can damage the masonry. A liner isn't necessary with a high-efficiency gas system, which, combined with tax incentives, explains why nearly all of Guiles' conversion customers choose high-efficiency equipment. Although it's probably not required, you'll likely choose to remove your oil tank for another $750 or so if it's above ground to $3,000 if it's buried.
The Bottom Line to Convert Oil to Gas
So is it worth spending potentially a few grand in conversion costs to switch to gas? Well, at last year's prices, your fuel-cost savings alone would pay you back in less than five years. But as the stock-market caveat goes, past performance is no guarantee of future results. Most natural gas is mined in North America, so some say its pricing less volatile than oil, which is a global commodity. But the truth is, there's no way to know for sure if gas will continue its substantial price advantage. The decision usually comes down to how complicated the conversion will be for your house—and how good the incentives are that the utilities and state agencies are offering, says Mark Wolfe, executive director of the National Energy Assistance Directors' Association, a trade group of state officials who help homeowners cut their energy costs.
Still, there are reasons other than money to make the switch. Gas has lower carbon emissions than oil, so it's better for the environment. Plus, once you have a gas line, you can get that commercial-style, six-burner stove you've always wanted.