With the rising costs of heating oil, many homeowners are considering alternative heating options like propane to save money. Propane and oil both offer efficient and affordable ways to heat your home, but they differ in several important ways.

This guide examines the pros and cons of oil vs. propane to help you determine the better heating fuel for your needs.

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 the 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?

A number of 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.

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.

So, Is Propane or Oil Better for Home Heating?

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.

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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 Btu, 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.

Editorial Contributors
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Elisabeth Beauchamp

Senior Staff Writer

Elisabeth Beauchamp is a content producer for Today’s Homeowner’s Lawn and Windows categories. She graduated from the University of North Carolina at Chapel Hill with degrees in Journalism and Linguistics. When Elisabeth isn’t writing about flowers, foliage, and fertilizer, she’s researching landscaping trends and current events in the agricultural space. Elisabeth aims to educate and equip readers with the tools they need to create a home they love.

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Lee Ann Merrill

Chicago-based Lee Ann Merrill has decades of experience writing and editing across a wide range of technical and scientific subjects. Her love of DIY, gardening, and making led her to the realm of creating and honing quality content for homeowners. When she's not working on her craft, you can find her exploring her city by bike and plotting international adventures.

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