Oil Vs. Propane Heating for Your Home (2024)

As someone who spends a lot of time inspecting homes and understanding their inner workings, I can’t help but notice the different heating systems people rely on. With energy costs always fluctuating, many homeowners have started exploring alternatives to traditional heating oil.

Propane has become a popular choice, promising potential savings and efficiency. However, each fuel source has its unique advantages and disadvantages that can impact more than just your utility bills. In my line of work, I’ve witnessed firsthand how the choice between oil and propane can affect a home’s overall condition and even its susceptibility to certain types of pests.

This guide will dive into the key differences between these two heating options, helping you make an informed decision that not only fits your budget but also aligns with your priorities for maintaining a comfortable and well-protected living space.

How Oil and Propane Heating Work

Oil and propane heating systems provide warmth by burning fuel to heat water or air. This heated air or water circulates through your home, releasing warmth from radiators or vents.

Both oil and propane require an on-site storage tank.

The critical differences between oil and propane lie in equipment, distribution, emissions, and efficiencies. When choosing between oil and propane, understanding these differences can help you select the right system for your home heating needs.

Key Factors To Consider

When deciding between oil and propane heating, there are several important factors to weigh, as we’ll explain below.

Propane heating systems tend to be more efficient than oil, with AFUE (Annual Fuel Utilization Efficiency) ratings of up to 98% compared to a max of 95% for oil.

This means propane systems convert more of the fuel to usable heat. High-efficiency propane furnaces feature improved burners and heat exchangers to maximize efficiency, lowering your heating bills compared to less-efficient oil.

Propane prices are more stable than those of oil because global supply and demand don’t affect them. This helps buffer against price shocks. Up-front costs for buying and installing a new propane furnace are often lower than those for a comparable oil model.

However, homeowners should always get multiple estimates. While propane costs less per Btu (British thermal unit) than heating oil, the overall expense of switching from oil depends on efficiency ratings. Crunch the numbers for your situation.

Propane tanks are easier to install than oil tanks, which often require more space and special permits. Propane providers handle delivery and tank monitoring, and propane tanks run out of fuel less frequently than oil tanks in cold climates, reducing the risk of a heating shutdown.

Oil heating requires more homeowner involvement, and oil furnaces usually require more maintenance than propane models. 

Propane emits less carbon and fewer greenhouse gases per Btu than oil. Propane is considered a clean fuel by the U.S. Environmental Protection Agency. High-sulfur oil emits more particulates and other pollution than low-sulfur propane heating, impacting indoor and outdoor air quality.

Propane-burning appliances like fireplaces and generators are available for supplemental heating. Oil heaters provide fewer heating alternatives.

Propane is highly flammable and combustible if a leak occurs and requires particular caution around open flames. Oil is less flammable but still requires safe handling and storage — fumes can cause illnesses with long-term exposure.

Propane has a strong smell, so leaks can be more easily detected. Oil leaks may go unnoticed until tank corrosion or leaks occur.

How Much Does Propane Vs. Oil Heat Cost?

Many variables influence heating oil and propane costs, as we’ll explore below.


  • Efficiency — High-efficiency models maximize heat output from each gallon of propane, lowering bills.
  • House size — Larger homes require more fuel to heat. Long or cold winters also drive up propane use.
  • Location — Regional supply and demand impact propane prices. Northern states tend to have higher winter demand and costs.
  • Tank fees — Tank rentals or financing fees add to costs. 

Heating Oil

  • Consumption — Old oil furnaces gobble up more fuel. Upgrading HVAC equipment improves efficiency to lower costs.
  • Crude oil prices — Global oil supply and demand cycles cause price fluctuations. Regional refining costs also factor in.
  • Delivery fees — Location factors into delivery expenses passed onto consumers. Rural areas often pay more.
  • Weather — Frigid winters increase oil consumption. Customers in cold climates use more fuel to heat homes.

Work with multiple suppliers to compare propane and oil costs based on your household’s size, your climate, and more. Your existing equipment also plays a significant role in total expense. Your HVAC professional can advise when it’s the right time to replace a furnace.

Making the Switch from Oil To Propane Heat

If your goal is to convert an oil-heated home to propane, this process involves removing the old oil tank, lines, and furnace to prepare for new equipment, often costing $500 to $1,500. A propane tank must be installed above or below ground. Underground 500-gallon tanks cost $1,500 to $3,000, while above-ground tanks are cheaper. 

You’ll need new gas lines and a propane-fired furnace. High-efficiency models provide the best return through lower heating bills. The new propane tank, lines, and equipment must pass inspections. Permits often add $100 to $500 in fees. If installing an above-ground tank, you must pour a new concrete pad, typically costing $500 to $1,500.

When you make the switch to propane heat, there are so many things propane gas can fuel for you, such as your dryer, hot water heater, fireplaces, and of course, gas furnaces.

Today’s Homeowner Tips

Many homeowners save 15% to 30% on heating costs by upgrading old oil heating systems to new, efficient propane equipment. Get multiple estimates to determine if converting from oil to gas makes financial sense for your home.

Pros and Cons of Home Heating Oil

Here are some pros and cons of heating oil to consider:

Pros of Heating Oil

  • Widely available fuel source
  • Oil furnaces have a relatively long lifespan of 15-30 years
  • Oil provides a high BTU output for effective heating
  • Oil stores safely on-site for long periods of time

Cons of Heating Oil

  • Overall operating costs tend to be higher than propane or natural gas
  • Oil furnaces require more maintenance than other systems
  • Risk of oil tank leaks which can contaminate soil and groundwater
  • Oil produces more emissions and particle pollution than cleaner-burning propane
  • Annual heating oil deliveries are needed, which can be inconvenient
  • Upfront costs for installing a new oil tank and furnace are expensive

While heating oil has some advantages in terms of heat output and longevity, the higher costs, emissions, and potential environmental hazards are driving many homeowners to switch to propane or other alternatives. Carefully evaluating the pros and cons can help determine if heating oil is the right choice for your home.

Final Thoughts on Oil Vs. Propane Heating For Your Home

There’s no universally “better” option when choosing between oil and propane heat. The preferred heating method depends on your specific needs and situation.

Key factors to consider are up-front system costs, operating efficiency, fuel expenses in your area, and convenience. For many homeowners, high-efficiency propane systems offer the best combination of affordability, low emissions, and convenience, making them an appealing alternative to oil.

However, oil remains a strong choice if you already have modern oil equipment. The decision also hinges on current fuel prices in your region. Crunch the numbers between upgrading your oil system or converting to propane. Get multiple quotes to make the right choice for your home.

FAQs About Oil Vs. Propane Heating

Is it worth switching from oil to propane heat?

It can be, especially with an older, inefficient oil furnace. Upgrading to a new, efficient propane system often lowers heating costs by 15% to 30%. Get quotes on new equipment and fuel to see if propane offers savings over oil.

How much does it cost to switch from an oil to a propane furnace?

Expect to pay $3,000 to $6,000 to remove an oil tank, install a propane tank and lines, purchase a new propane furnace, and obtain permits. Have an HVAC pro assess your situation.

Is propane or oil heat cheaper?

It depends on equipment efficiency, local fuel prices, and climate. While propane can be cheaper per But, high-efficiency systems make the most of your fuel. Do the math for your situation.

Is it worth replacing an oil furnace?

Old oil furnaces are 60% efficient at best. Upgrading to a high-efficiency model (90%-plus AFUE) can cut heating costs by 30% or more. Get quotes on new oil or propane equipment to decide.

Does propane heating cost more than natural gas?

Usually, yes, since natural gas is so abundant. But millions of rural homes without gas access use propane. Improving your home’s efficiency helps offset higher fuel costs.

What does propane have to offer?

Propane offers numerous advantages like clean burning, high efficiency, lower emissions, and excellent heating capacity. Propane systems also tend to require less maintenance than oil furnaces. With propane, there are no annual fuel deliveries needed since it’s stored on-site.

How does propane heat work?

Propane heating systems burn gaseous propane fuel to heat air or water. This heated air or water is then circulated through the home via ducts and vents or a radiant heating system. Propane is combusted efficiently to maximize the usable heat output.

Article Update Log

Reviewed for accuracy, cost data, industry best practices, and expert advice by Coty Perry.

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