Heating Oil vs Natural Gas: Which is Cheaper? | heating.help

If you heat with oil, you already know the pain of watching a delivery truck pull away with several hundred dollars of your money — and wondering whether a natural gas line would have saved you a fortune. The short answer is that natural gas is cheaper in most U.S. markets, but the gap depends heavily on your local rates, your equipment efficiency, and whether you already have gas service at the curb. This guide breaks down heating oil vs natural gas with real BTU math, current price ranges, and the conversion costs nobody mentions upfront.

The Short Answer: Natural Gas Usually Wins on Cost

For the vast majority of American homeowners, natural gas is significantly cheaper to heat with than heating oil — often 40% to 60% less per year for the same amount of heat. That’s why roughly half of U.S. households heat with gas while heating oil has shrunk to about 4% to 5% of homes, concentrated in the Northeast (New York, Pennsylvania, Connecticut, Massachusetts, Maine, New Hampshire, Vermont, Rhode Island, and New Jersey).

But “usually cheaper” is not the same as “always the right choice.” In places where the gas main doesn’t reach — rural New England, parts of the Mid-Atlantic — converting can cost more than a decade of fuel savings. And in a few markets, unusually high utility rates narrow the gap.

How to Compare Fairly: BTU, Efficiency, and Delivered Cost

Comparing a gallon of oil to a therm of gas is apples to oranges unless you convert both to the same unit. Here’s the three-step method HVAC contractors use.

Step 1: Compare energy content

• No. 2 heating oil: about 138,500 BTU per gallon (per ASTM D396, the standard specification for fuel oils).
• Natural gas: exactly 100,000 BTU per therm, which is roughly 100 cubic feet at typical heating values near 1,030 BTU per cubic foot.

So a 275-gallon oil tank at 80% fill (about 220 usable gallons) holds roughly 30.5 million BTU of raw energy — the equivalent of about 305 therms of gas.

Step 2: Apply furnace efficiency (AFUE)

Annual Fuel Utilization Efficiency (AFUE) tells you how much of that raw energy becomes heat in your ductwork.

• Oil furnaces: most modern units run 80% to 86% AFUE. Condensing oil furnaces reaching 90%+ exist but are rare, expensive, and hard to service.
• Gas furnaces: standard units are 80% AFUE; high-efficiency condensing models reach 95% to 98% AFUE. ENERGY STAR certified gas furnaces are 95% AFUE or higher.

That efficiency spread alone gives natural gas a structural advantage before a single dollar is compared.

Step 3: Calculate cost per million BTU (MMBtu)

Use this formula: (price per unit ÷ BTU per unit) × 1,000,000 ÷ AFUE.

At those assumptions, heating oil costs more than twice as much per unit of usable heat. To match $1.50-per-therm gas, heating oil would need to fall below roughly $1.90 per gallon — a price the U.S. hasn’t seen since the early 2020s.

Real-World Annual Cost: A 2,000-Square-Foot Home

Say your home needs 80 million BTU of delivered heat per heating season — a reasonable figure for a well-insulated house in a cold-climate state.

• Heating oil at 85% AFUE: 80 ÷ 0.85 = 94.1 MMBtu of fuel, or about 679 gallons. At $4.00/gal, that’s ~$2,716 per season.
• Natural gas at 95% AFUE: 80 ÷ 0.95 = 84.2 MMBtu, or about 842 therms. At $1.50/therm, that’s ~$1,263 per season (plus roughly $150–$250 in fixed customer charges).

Estimated savings with natural gas: $1,200–$1,450 per year. Even in high-rate Northeast markets where gas runs $2.20 per therm, the annual bill lands near $1,850 — still roughly $800 to $900 cheaper than oil.

Homeowners who burn 900+ gallons of oil in a cold winter will see even larger absolute savings, which is why payback periods on conversion in the Northeast often land in the 3-to-7-year range.

Why Fuel Prices Behave So Differently

Heating oil is a refined petroleum commodity. Its price tracks crude oil, refinery capacity, diesel demand, and global events — and it’s set by your local dealer, not a regulator. That means two neighbors on the same street can pay wildly different prices depending on whether they signed a fixed-price contract in July or called for an emergency delivery in January. It also means you can shop around, negotiate, and use budget plans or price caps. Our guide to current heating oil prices and pricing programs explains how to time your fills and read a delivery slip.

Natural gas is a regulated utility product. The commodity portion (the gas supply charge) fluctuates with Henry Hub spot prices, but the delivery charge and customer fee are approved by your state public utility commission. You generally cannot negotiate, but you also rarely see the violent swings that oil customers endure. Expect seasonal bills to spike in January and February and drop sharply in shoulder months.

Bottom line: oil prices are volatile and negotiable; gas prices are stable and regulated. Over a 10-year horizon, gas pricing has been far more predictable.

Equipment and Installation Costs

Replacing Like-for-Like

Oil systems carry an extra maintenance burden: nozzles, filters, and the annual combustion cleaning are non-negotiable, and oil-fired equipment tends to require more frequent service calls than a sealed-combustion condensing gas furnace.

Converting from Oil to Gas

A conversion is more than a furnace swap. Expect these line items:

• Gas furnace and installation: $3,000–$7,000
• Gas line from the main to the meter/appliance: $500–$2,500
• Venting or chimney liner: $800–$2,500 (a 95%+ AFUE furnace can vent through PVC sidewall, which sometimes saves money)
• Oil tank removal or abandonment: $1,000–$3,000 above ground; $2,000–$5,000+ for a buried tank, and far more if soil contamination is found
• Permits and inspection: $150–$600

Realistic total: $3,000 to $10,000, with buried-tank surprises at the high end. If you’re comparing equipment in detail, our breakdown of natural gas furnace types, efficiency ratings, and installed costs is a useful next read.

The Availability Question

The cheapest fuel in the world is useless if the main isn’t on your street. Utilities generally won’t extend a line for a single customer without a substantial contribution — sometimes $5,000 to $25,000. Get a written quote from the utility before you buy a furnace.

Codes, Standards, and Efficiency Rules to Know

• NFPA 31 governs the installation of oil-burning equipment; NFPA 54 / ANSI Z223.1 governs fuel gas piping and appliances. Any contractor you hire should be working to these, plus your local mechanical code.
• DOE regional standards require 90% AFUE or higher for gas furnaces installed in northern states (80% in the South). Federal rules phase in 95% AFUE for non-weatherized gas furnaces nationally in the coming years, which will raise replacement costs but lower operating costs.
• ENERGY STAR certification means 95%+ AFUE for gas furnaces. For oil, the program’s furnace criteria (historically around 85% AFUE) capture only a small slice of the market.
• CO alarms are required or strongly recommended in most states. Install UL 2034-listed carbon monoxide alarms on every level and outside sleeping areas, regardless of fuel type.

Safety and Environmental Considerations

Heating oil has a flash point around 100°F to 140°F, so it won’t ignite at room temperature — the primary risk is tank leakage and soil or groundwater contamination, which can create a genuine environmental liability, especially with older buried tanks. Oil also produces about 163 pounds of CO2 per million BTU burned.

Natural gas carries leak and explosion risk in concentrated spaces, which is why utilities add mercaptan (the rotten-egg odor). It produces roughly 117 pounds of CO2 per million BTU — about 28% fewer emissions than heating oil. Both fuels are fossil-based; if decarbonization is a goal, the real alternative is a cold-climate heat pump, and states in the Northeast have begun offering substantial incentives to switch.

Also worth noting for 2026: the federal 25C energy efficiency tax credit expired at the end of 2025, so the incentives that mattered most in 2024 are gone. Check your state energy office and utility for current rebates before signing a contract.

Which Fuel Should You Choose?

Choose natural gas if:

• A gas main is already on your street or already connected to your home
• Your annual oil bill exceeds $2,000
• You plan to stay in the home more than 5 years
• You want lower emissions and less maintenance

Stick with heating oil if:

• Gas service isn’t available and the connection cost is prohibitive
• You have a newer, well-maintained oil system with many years of life left
• You’re in a market with a strong dealer network and competitive pricing
• You’re planning to electrify with a heat pump rather than pay for a gas conversion you’d later abandon

For a broader primer on fuel oil grades, tank types, and system components, see our complete heating oil guide.

Frequently Asked Questions

Is heating oil cheaper than natural gas per BTU?

Almost never in today’s market. After adjusting for energy content and furnace efficiency, heating oil typically costs about twice as much per million BTU of delivered heat as natural gas. At $4.00 per gallon for oil and $1.50 per therm for gas, oil runs roughly $34 per million BTU versus about $16 for natural gas.

How many gallons of heating oil equal one therm of natural gas?

One gallon of No. 2 heating oil contains roughly 138,500 BTU, while one therm of natural gas contains 100,000 BTU. So one gallon of oil carries about 1.39 therms of raw energy — or, flipped around, about 0.72 gallons of oil per therm.

How much does it cost to switch from heating oil to natural gas?

Most homeowners spend $3,000 to $10,000 to convert, covering a new gas furnace, gas line extension, venting or chimney liner, permits, and oil tank removal or abandonment. If the gas main isn’t on your street, utility connection charges can push the total much higher — always get a written quote from the utility before committing.

Conclusion

Heating oil vs natural gas is not a close race on operating cost: with typical 2026 prices and modern equipment, natural gas delivers the same heat for roughly half the money, and the annual savings of $1,000 to $1,500 make a conversion pay for itself in well under a decade for most Northeast homeowners with access to a gas main. The calculus changes only when gas service isn’t available, the connection cost is five figures, or you plan to electrify rather than invest in combustion equipment. If you already have a gas line at the curb and a furnace over 15 years old, converting is the financially sound move; if you’re off the