Natural gas vs. heating oil

Gas Heat – A Quick Primer

When discussing gas heat, people are referring to natural gas. But what exactly is natural gas, and where does it come from? Natural gas is composed primarily of methane but includes other natural compounds, including ethane, propane, and butane. Natural gas is obtained by drilling, usually when searching for oil deposits. Because it is lighter than the oil itself, the gas is typically found floating on top of the oil or mixed within the upper layers of the oil deposit.

Gas Heat – The Pros

There are many advantages when using natural gas to heat your home.

  1. Environmentally-friendly
  2. Natural gas is considered environmentally friendly because it burns cleaner than any other fossil fuels. But this point can be sharply contested (more on that later.)

  3. Steady prices
  4. As most consumers know, oil prices can fluctuate drastically and be affected by factors that have nothing to do with actual oil supplies. Homeowners who have natural gas see more consistent costs associated with home heating. As heating and cooling costs can absorb up to half of a home’s annual energy usage, this savings can go a long way.

  5. Outages
  6. During storms, in both summer and winter, electrical power can frequently be lost. Underground gas lines are buried deeper than other utilities, so gas service continues even during blizzards and hurricanes.

  7. Multipurpose
  8. Natural gas can be used in several different ways in your home. Aside from heating your home via a gas furnace, it can provide the energy for a water boiler. It can be used to power appliances, including your washer and dryer, in addition to cooking. You can even use natural gas to power your fireplace. 

  9. Readily available
  10. Natural gas is produced right here in the U.S., which helps create jobs while reducing the country’s dependence on foreign-sourced fuel.

Gas Heat – The Cons

There are certainly many clear advantages to using natural gas to heat your home, but what are some of the disadvantages? Let’s take a look.

  1. Even though its proponents claim that natural gas is environmentally friendly, drilling still needs to be done to obtain it. The controversial drilling process known as fracking is frequently used in conjunction with natural gas drilling. Fracking can have a negative effect on the water supply and the fracking zone.
  2. Natural gas releases high quantities of carbon dioxide into the atmosphere, which contributes to global warming.
  3. Leakages. If there is a natural gas leak in your home, consequences could be quite severe. Since it is highly combustible, explosions are possible.
  4. Natural gas itself is toxic. Without the additives that provide an odor, leaks can be fatal.

Natural gas presents a considerable number of advantages. So why then, according to U.S. Energy Department, did 82% of the 5.5 million households in Northeastern American families use oil for their heating needs in 2018? Interestingly, the type of heating that a home uses can be deeply influenced by the region of the country where you live. Let’s look at oil, its pros and cons, and finally, compare gas vs. oil heat.

What is Crude Oil?

Crude oil acquired by drilling through the earth’s surface is the primary source of production of energy. The color of crude oil depends upon its hydrocarbon composition. The color of crude oil scales from colorless to black. It is volatile and has a range of viscosity.

Depending on the level of sulfur present, crude oil can be sweet or sour. Sweet crude has a sulfur content of 0.5 percent, and sour crude has 1 percent sulfur content by weight. Natural gas occurs with deposits of crude oil.

Crude oil can get characterized by the compound present in them. These compounds are paraffin, naphthenes, and aromatics. Paraffin, the most common amalgam in crude oil, is a vital part of Gasoline. It is highly valued. Naphthenes are part of the liquid refiner products. They even form hefty asphalt-like residues of the refining process. Aromatics constitute a small percentage of crude. The most usual aromatic is benzene.

Crude oil first came across during the industrial revolution. It revolutionized the machines built during the 19th century. Today the world’s economy depends on crude oil (even referred to as black gold). Crude oil is utilized as fuel, and it is even used to form plastics, clothing, and gum.


Natural Gas and Oil Correlation

The correlation coefficient is a statistical measure of the extent to which the price of natural gas and crude oil move together. It is also a measure of the degree to which the prices move together. The correlation coefficient is measured on a scale of -1 to +1. A measure of +1 indicates a perfect positive correlation between two asset prices, meaning the prices of the assets move together in the same direction to the same degree proportionally all of the time.

A measure of -1 indicates a perfect negative correlation. This means the asset prices move in the opposite direction of each other in the same proportion all of the time. If the correlation coefficient is zero, it means there is no relationship between the two prices. The correlation coefficient is often used in the construction of portfolios by providing a statistical measure of the diversification of the assets in the portfolio.

So What’s Better – Gas or Oil?

So which should you choose, gas or oil heat? This isn’t an easy question to answer. In some cases, it may come down to personal preference. In some areas, natural gas isn’t even available so you should check before spending time comparing sources. Here are some important points to consider.

  1. Oil burning equipment may not be as efficient, it requires more maintenance, but it does last twice as long as gas burners.
  2. The cost to convert from oil to gas can cost upwards of $10,000, but if you were going to replace your old oil burner anyway, making the switch then might make more sense. Switching from oil to gas might also get you some money back in terms of tax credits.
  3. Natural gas costs considerably less than oil, and since it runs continuously, you’ll never have to worry about running out and needing an expensive emergency delivery. Oil prices have dramatically dropped recently, but there’s no guarantee that these prices will remain low.
  4. Natural gas can be used for other purposes than home heating, but it does carry with it a risk due to leaks and carbon monoxide poisoning.

If you do have the option to choose between them, it might be best to talk with friends who have gas and those who have oil and compare utility costs. Since this decision may mean upfront spending cost differences of several hundred to a few thousand dollars, this is a serious consideration. We hope that this helps, and if you have any questions about oil vs. gas, you can always give our energy experts a call at (516) 221-2559 to discuss.

Gas Production and Oil

Natural gas production has increased dramatically with the discovery of new shale drilling technologies. Between 2007 and 2012, natural gas production from shale drilling rose by a whopping 417% and overall production increased by around 20% during the same period. Natural gas prices have shown greater volatility historically than crude oil prices, while low natural gas prices have led sectors such as the transportation industry to use more natural gas over crude oil.

Production then remained stable, rising slightly year-over-year from 2012 through 2019. In 2020, amid the COVID19 pandemic, however, crude production dropped to 2013 levels.

6. Overall Convenience

It may not seem like a crucial factor to consider upfront, but the convenience of a heating system can impact your overall experience and satisfaction down the road. To know if a boiler or furnace is convenient for you, look at the size of your home.

Boilers are tall and tend to be larger than furnaces. As a result, they need to be installed along a wall, which often ends up being in a room with ample space, such as a basement or garage. On the other hand, furnaces come in a variety of sizes and can sometimes be installed in smaller locations, such as an attic.

Fuel Costs

When it comes to fuel costs, however, the advantage tilts in favor of gas. The U.S. Energy Information Administration forecasts the average household will spend the following for heating this winter (October 2012 through March 2013):

  • Natural gas — $690 per household, 13.3% increase over the previous winter
  • Heating oil — $2,558 per household, 22.5% increase
  • Propane (Midwest) — $1,448 per household, 5.9% decrease
  • Electricity — $964 per household, 7.3% increase

While oil prices are more volatile and subject to the vagaries of global supply and demand, natural gas production is centered in the U.S. and Canada, securing a more stable supply. Perhaps because of this difference, about 50% of American homes are heated with gas today, versus about 8% of homes with oil heat.

Here is a look at some of the pros and cons of each type of furnace:

Trane XV80 Oil Furnace

Trane XV80 Oil Furnace

Comparison of oil and natural gas

Natural gas is a gaseous hydrocarbon mixture of predominantly methane and some ethane. Like natural gas, “oil” is a broad term, and may refer to a range of substances such as rock oil, mineral oil and crude oil. Oil in the context of this article refers to crude oil, the raw, liquid natural resource which is often refined into gasoline, diesel and other petrochemicals. Oil may be classified according to its geographical location of drilling, its sulfur content and its API gravity. The latter classification helps separate light oil from heavy oil by measuring its hydrocarbon density compared to water. Another classification of fuel oils is through the six fuel grades, where viscosity, boiling point, and the length of the carbon chain increases with the number. This grading system is commonly applied in the US.

Whereas natural gas mostly consists of methane and ethane, with one and two carbon atoms, and four and six hydrogen atoms, respectively, the six fuel grades classification starts at hydrocarbons of chain lengths 9-16 atoms. In terms of heating value, methane and ethane, the main components of natural gas, are among the most efficient fuels available today.

The price of these fuels are normally inversely proportional to its number, i.e. no. 1 fuel oil, also known as jet fuel, is more expensive than no. 6 fuel oil, also known as heavy fuel oil (HFO). The latter is one of the primary fuels used for cruise ships. Marine gas oil (MGO), which is roughly equivalent to no. 2 fuel oils, and marine diesel oil (MDO), no. 3 fuel oils are both commonly used as bunker fuels.  

While many carbon-based fuels have faced cooling demands in recent years, liquified natural gas (LNG) is one of the fastest growing fuels globally today. When compared to fuels such as oil, LNG has a high energy density, low sulfur content and relatively low carbon emissions, making  it an optimal substitute for other, “dirtier” fuels in the green transition. Other properties of LNG, such as its ability to take up 1/600th of the space natural gas in a gaseous state would occupy, makes it suitable for sea borne transfer by ship.  

Small scale LNG shipping will likely become an imp
Small scale LNG shipping will likely become an important part of the future’s energy system.

The price between oil and gas is correlated as they are similar energy commodities. The price relationship is said to be an “inter-commodity spread,” so the market attempts to benefit from the value of the differential between the two, meaning that one becomes more desirable if the other becomes more expensive. Clearly, the two are closely linked in terms of application, chemical structure and market value, but in terms of pollution and energy efficiency, natural gas holds an advantage over oil. The pollution profile of fuel is of particular interest to actors within the shipping sector due to recent IMO 2020 regulations regarding pollution.    

Gas Furnaces

  • Natural gas furnaces have higher heating efficiency and their fuel costs less, but your home must be in an area where a gas supply is available.
  • Furnaces require very little maintenance (no service contract needed), but gas provides less heat per BTU than oil.
  • Furnaces are quieter and cleaner, but they cost more than oil furnaces.

Regardless of which type of heat source you prefer, use a qualified and reputable HVAC contractor and get several estimates before you make any major investment in your home. There are often public and private rebates or financing incentives available to homeowners who upgrade their systems, so make sure to explore all of your options before you buy.

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