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Oil Prices Raise Appeal of Natural Gas

The European Union’s decision today to an embargo on Iranian oil sent crude prices soaring, and forecasts say they’ll continue to rise. Natural gas prices, however, are projected to remain low. For homeowners who use heating oil, the growing gap between oil and natural gas prices may make switching more attractive – but experts say homeowners should take some other simple steps first.

Milder weather is protecting households from some of the impact of rising heating oil prices, but natural gas users are still better off, experts say. In October, the Energy Information Administration projected the average household using heating oil would spend 8% more for heat this winter compared to last year. This month they revised that forecast, estimating households would pay only 4% more for heating oil this year, thanks to the balmy winter thus far. But January’s forecast also projects that homes using natural gas will actually pay 7% less for heat this year. And the EIA’s latest Annual Energy Outlook, released today, shows this gap continues to grow — oil prices are projected to rise to $120 a barrel by 2016, while natural gas prices should remain below $5 per thousand cubic feet through 2023.

For homeowners, this long-term trend is increasing the price advantage of heating with natural gas. In New York State, for example, if prices remain where they are through this winter, the average household using heating oil will pay $2,030 more for heat this year than the average household using natural gas, according to data provided by the New York State Energy Research and Development Authority. For homes using a furnace, the NYSERDA estimates it would cost about $7,500 to switch to gas; for homes using a boiler, the tab comes to about $10,000. At today’s prices, that means switching would pay for itself in about 4 or 5 years.

Before considering switching, however, homeowners should get an energy audit of their home to see if there are easier, cheaper ways to cut heating costs, says Andrew Padian, the vice president of energy initiatives at the Community Preservation Corporation and a board member of Green Home NYC. “It’s always better to do the efficiency stuff first and then the switching stuff later,” Padian says, because a home that’s running more efficiently should allow for a smaller (and cheaper) new furnace or boiler. Look for a Building Performance Institute-certified building analyst who can do a thorough test for places where warm air is leaking out. Then, if switching to gas still makes sense, homeowners should be sure to get the most energy-efficient furnace or boiler possible, Padian says.

Natural gas isn’t available in all areas, so homeowners should first contact their local utility to find out if they can switch, says Mark Wolfe, the executive director of the National Energy Assistance Directors’ Association. Where it’s possible, switching still only makes sense for people planning to stay in their homes long enough to recoup the cost, because the switch likely won’t increase the value of the home, Wolfe says. Those considering the switch should look out for energy-efficiency incentives being offered in their area — in many cases, utility or government incentives will cover part or all of the cost of a new furnace or boiler, or provide low- or no-interest loans, he says.


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