Oil Heat Faces a $6-a-Gallon Test

Heating oil is about to get a lot more expensive. The Energy Information Administration expects average prices of $4.80 a gallon this winter, up 33% from last year, and one New York-area supplier has already charged $6.86. The jump is tied to tight global oil supplies and the wars in Iran and Ukraine, and it mainly affects Northeast homes that heat with oil.

If your oil furnace or boiler is old, replacing it can still help even if you stay with oil. Industry data cited in the piece shows high-efficiency oil boiler swaps saving around 25% on fuel compared with older units, and oil-heated homes today burn less than half the fuel a similar home used in 1978. That said, a full switch to a heat pump (a system that moves heat instead of burning fuel) costs two to three times as much as simply replacing an oil system in some New England homes, with a payback period of six to seven years. One contractor quoted in the article says leads from oil customers asking about heat pumps are up 30%, and expects a strong sales season as prices bite.

Electricity costs matter too, since New England rates are among the highest in the country. Massachusetts is trying to improve the math: it now requires major utilities to offer discounted winter rates for homes that heat primarily with heat pumps, which saved participating households over $250 last winter. Those discounts are getting bigger this year — National Grid's rate cut is rising from about 2.5 cents to 4 cents per kilowatt-hour, and Unitil's from about 2 cents to 3.6 cents. If you're in Massachusetts and considering a heat pump, it's worth checking whether your utility offers this rate.