Propane, Electricity, or Oil – Which one is cheaper?

By glblguy


I recently received the first full month electric bill for our new home here in the NC mountains and was shocked: $420.00! That is the most expensive electric bill I have ever had. Granted, my new house is all electric, where my prior homes were both electric and gas.

To get a comparison to our previous house in Charlotte I looked up the electric bill for last year and added on the gas bill. Electric bill: $184.33 + gas bill: $111.00 = $295.33. That’s an increase of $125.00. While the $420.00 electric bill looked pretty high, comparing it to my prior electric+gas bill didn’t make it seem as bad as I thought. The additional $125.00 is easily explained due to the colder temperatures here in the mountains, along with the fact that we’re using a number of supplemental heaters. The supplemental heaters are used to heat the upstairs area and basement as they aren’t heated by central heat. This is something high on our list of items to fix, but until we sell our other home in Charlotte, we’re holding off.

Price of Propane, Electricity, and Oil

Given the additional cost though, it did make me wonder if having a full electric house was the most cost effective option. I created a quick little spreadsheet to do some comparing and pulled up Google and started researching a bit.

In order to compare the three, I had to get the details on prices along with a basis on how much energy is produced by each option.


Propane is a liquid and thus purchased by the gallon. Propane produces 93,000 BTUs (British Thermal Units) per gallon. Propane based appliances are generally 85% efficient, thus the net BTUs produced is 79,050 BTUs.

Cost for propane varies significantly depending on where you live, but my current supplier is charging $2.79/gallon.


Electricity is sold by the kilowatt hour (KWH). Electricity produces 3,412 BTUs per KWH. Electrical appliences are 100% efficient at converting electricity to heat and thus the net BTUs produced is 3,412 BTUs.

Cost for electricity also varies significantly depending on where you live and who your provider is. In my area, electrical power is 10.06 cents/KWH   This is just below the national average of  10.68 cents/KWH.


Like propane, oil is a liquid and thus sold by the gallon. Number 2 heating oil produces 123,000 140,000 BTUs per gallon. Oil appliances are generally 85% efficient, resulting in a net BTU of 104,550 119,000 BTUs per gallon.

Oil costs also vary based on area. In my area, oil is currently about $2.87 per gallon.

Comparing Propane, Electricity and Oil

When comparing the three sources of energy, a million BTUs is generally used. Using the numbers above, here is how the three options compare:

Propane: $35.29 per 1 million BTUs
Electricity: $31.06 per 1 million BTUs
Oil: $24.12 per 1 million BTUs

As you can clearly see, oil is the least expensive option for me based on where I love. Using oil would save me on average about $46 per month or $552.00 per year. While not a significant savings, it’s not an amount of money to turn my back on either.

I made a few quick calls to various HVAC companies in my area. While the estimates varied, it would cost me approximately $3,000 – $5,000 to convert from electric to oil based heat. Using $4000.00 as the median, it would take me a little over 7 less than 4 years to begin to recover the cost of switching to oil based heat.

Staying with Electricity

7 years is a long time to, and I’m concerned that the cost of oil isn’t going to go down, but will continue to increase, most likely far more rapidly than propane or electricity. Thus making the 4 year mark even longer.

I am also concerned about the environmental impact of using oil, even though it’s currently a less expensive option. I just don’t really feel comfortable contributing to continuing the use of oil as an energy source.

I’m also going to do a number of things to reduce my energy use as well which should help.

Calculating which is cheaper for you

If you’re interested in calculating which is the cheaper option for you, I’ve created a Google docs spreadsheet you can use. Just export it to whatever format you prefer and enter your own cost numbers.

Given the choice I have and the comparison I’ve provided what would you do if you were in my shoes? Any perspectives on environmental impact of propane, electricity and oil?

Photo by: Adrià garcía

27 Responses (including trackbacks) to “Propane, Electricity, or Oil – Which one is cheaper?”

  1. Patrick Says:

    I think you are making a good decision by not converting to oil. These lower prices we are experiencing are mostly due to the rest of the economy. As soon as the economy picks back up, I think the cost of gas and oil based products will go with it.

    We’ve used different heating methods in the past. I grew up with electric and a wood burning stove, then moved to electric, and now gas. They all have their pros and cons. :)

  2. Jeff Says:

    My favorite was the natural gas heat I had in my last place. I didn’t run the numbers, but it seemed cheaper to me.

    Maybe you should run your comparison again using last year’s prices to see whether Patrick’s economy argument stands. Oil wasn’t cheap last year.

    In your situation, I’d stick with electricity, honestly… but that’s mostly because I wouldn’t want to put out the initial conversion cost.

  3. Mark Framness Says:

    Last year at this time I had bills like that. Our basement floor needed warming for the concrete to cure, so as soon as the place was closed in & the furnace in & connected it was turned on. Imagine heating an uninsulated unsided house with temps well below freezing! Once the place was sided & insulated the bills got reasonable.

    While I have never run the numbers on natural gas vs. electricity the working assumption I had was NG was the cheaper of the two and so our dryer has always been a gas dryer (in our previous place our landlord had to run a line to accommodate this) and now we are in our new place we continue to use natural gas for heating, clothes drying, and our main cooktop burns gas.

    You might want to check with your utility company to see if they have a time of use plan available. Time of use sells electrons at a premium during business hours and at a discount off business hours. My father’s cabin (in Northern Wisconsin) is heat by a combination electric and wood. He is on a time of use plan and has a timer that turns on/off his heat when the electrons are cheap/expensive (2x during the expensive time & ½x during the cheap time). Typically we use heat to get the cabin up to temp when we arrive and then let the electrics hold the temperature from that point. That works unless it is seriously cold then we burn wood all of the time.

    So, you would use the electric off hours for peak heating needs and the fireplace for establishing a base. Or you could reverse it and use the fireplace to create peak heat & the electric for a base heat if time of use is not available or viable.

    Another thing to think of, may be to convert the propane burner into a high efficiency zero clearance wood fireplace. I have been analyzing & writing about wood burning of late. I need to revisit my analysis to account for efficiency. Still, without efficiency factored in my Therms (1 therm = 100,000 BTUs) are less than half the cost of natural gas derived therms.

    Being up in the mountains, I am sure you can find sources of firewood.

    Anyway here is the link to my writing on heating with wood:

  4. Patty Flagler Says:

    If you lose power in the winter, what then? If at all possible, please consider a woodstove as either your primary heat or as a supplemental heat source. I never assume that the power will always be on.

  5. Mark Framness Says:


    I did assume you did not have a gas line nearby. Given the choice most people choose gas, but even where I live our neighbors have a propane tank, it is obvious the gas line we hooked up to was not there when they built.

    The wood option has become more expensive as a chimney has to be built. The chimney does more than just exhaust smoke & gas it creates a draft to suck in that needed oxygen.

    So you are truly stuck with electricity, propane, and oil as your options.

    Okay, so given your current setup here is what I suggest:
    Investigate time of use – if available & feasible get setup with it.
    Get a programmable thermostat to control your electric baseboard heating according to the time of use parameters (I have an article on my blog coming up on this topic). Install the thermostat and become familiar with its operation, and use it. Set it on low overnight and during the day. Raise temperature at waking time & when people first start to come home. After initial warming let the temperature return to its base & use your fireplace to keep the heat up. For example, at night my thermostat is set at 55&#deg; F and about ten minutes before my wife wakes for work I raise the temp to 63&#deg; F which means 72&#deg;+ F in our room. About the time she is out the door, the thermostat allows the temperature to fall back to 55&#deg; F. In the afternoon, I bring the temp up to about 63&#deg; F again, but since I am at home (off assignment) I have a fire going and typically our furnace runs two hours or less per day. Current outdoor temp is 7&#deg; F with bright & clear skies (solar gain)!
    Use your propane fireplace to provide peak heat when people are home.
    Check your insulation, siding, and windows for possible improvements.

    Good luck on that!

  6. MITBeta @ Don't Feed the Alligators Says:

    I wrote a very similar article recently that can be seen here.

    The results are a bit different based on 3 things: 1. The cost of utilities is different where I live, 2. I used different efficiency numbers, and 3. the number you used for the heating value of oil is a bit low.

    If I were putting in a propane appliance today, I would not put in something less than 90% efficient (as opposed to the mid-efficiency appliance you used in your analysis) and I would look for one that was 95% efficient. This will put you at the high end of the installation scale that you cited, but will be worth it in the long run as it lowers your cost to $30 per million BTU.

    You mention that you’re not happy about the environmental aspect of using oil versus electricity. Consider that the true efficiency of electricity is really closer to about 33% given the thermodynamic inefficiencies of the power plant plus transmission losses. However, we only pay for the end product unlike with other fuels, so those inefficiencies are invisible to most.

    So to get 1 million BTU of heat using electricity, you have to burn 3 million BTU of coal at the power plant. Do you think burning 3 times more coal than oil is more environmentally friendly?

  7. Super_E Says:

    Before you make a decisions please call your insurance company and ask them if changing to oil will affect your home insurance premiums? I’m not to sure why but I’ve heard of insurance premiums going down when people in my area switched from oil to electricity – probably having something to do with no longer using the oil tank that was is their basement. I wouldn’t be surprised if they raise premiums when you go from electricity to oil.

  8. plonkee Says:

    Well, I think for the short term, the electricity use reducing thing has got to be the way to go. Definitely get a programmable thermostat. How well insulated is your house? Might want to try and do something about that. Presumably you’re already on CFLs and switch off your lights whenever they’re not being used (or as much as you can with 5 kids).

  9. MITBeta @ Don't Feed the Alligators Says:

    You can’t move all of the appliances up in efficiency, just the propane one. Oil heaters peak in efficiency in the 85% area. If you push them higher than this the flue gases condense in the chimney, simultaneously rotting it out and plugging it solid with soot. And obviously you can’t improve on the electric heat efficiency. This makes propane cheaper than electric in the long run.

    Clearly it makes sense from an economic standpoint to run the electric numbers based on efficiencies at your house. I was just pointing out that from an environmental viewpoint, you have to take the whole cycle into account. It’s fantastic that most of your electric comes from clean power sources. But the sad fact is that 50% of our nation’s electricity comes from coal, which is our dirtiest, most carbon intensive fuel.

    How is the electric heat delivered in your house? Baseboard radiators, central electric furnace, unit heaters, heat pump?

  10. Mark Framness Says:

    LED lights may help even more, I have a few in the house, but they are niche lighting.

    Another possibility would be geothermal. With your heating bills, I am guessing geothermal would pay back a lot quicker. How much land do you have?

  11. Mark Framness Says:


    Down six feet or so underneath the surface, the earth maintains a steady temperature. Geothermal takes advantage of that fact by using the earth has a heat sink in the summer (think air conditioning) and a heat source in the winter.

    What they do is to bury a system of pipes and circulate a heat carrying fluid. In your basement there is a compressor/heat exchange system. So in the winter time the heat is extracted from the fluid, concentrated, and then used to heat your home. In the summer time it works in reverse, heat is pulled from the air, transferred to the fluid, and sent to the earth.

    Essentially, they lay pipe under the frostline in a loop field in the ground or drill straight down into the earth ala water well. Then they install the heat exchange system in the house.

    Couple of problems I see for you. Since it sounds like your heating is electrical baseboard you will need ductwork, in addition what you describe sounds like you will need a vertical loop and those are more costly than horizontal fields. Then of course as you note you have your monetary hands full right now. However, you can start planning this right now.

    I had a geothermal quoted out for our construction and the salesman was shifty. He factored out the ductwork as both systems need ducting, sounds reasonable. Problem is, his duct work was a lot more costly than ductwork in our conventional quote. That is, he shifted his margins from the loop field & the heat exchange equipment to the ductwork.

    Geothermal systems are typically tax-advantaged in some way, but of course that varies from state to state & locality to locality. They do use electricity, but you are not burning fossil fuels.

    The only thing I can see that will make a big difference is to radically re-engineer your HVAC system, and as you say that is not in the cards right now.

    When the wife & I were shopping for a home sometimes the spec sheets the realtors would hand out sometimes included utility bill numbers. I take it your purchase did not include those numbers, huh?

  12. Funny about Money Says:

    Whoa! Is it legal to have an unvented propane fireplace???? In our parts, a gas fireplace has to be vented. If you retrofit a wood-burning fireplace for gas, they make you REMOVE the flue damper, so that the darn thing hangs open all summer long, when you’re air-conditioning against 115-degree exterior temperatures. If you don’t already have carbon monoxide detectors, it might be wise to get some–they don’t cost much and are easy to use.

    Programmable thermostats are inexpensive; it might be worth trying one just to see if it would help. Once everyone in is bed and under lots of covers, the ambient temperature can drop pretty low without causing discomfort. I leave my heat off at night, period, and preheat the bed with a heating pad — I understand an electric blanket is cost-effective to run, but I prefer a down comforter and a couple of cotton blankets. Possibly another option is simply to stay out of the parts of the house that are difficult or expensive to heat: have the family gather in one or two rooms during the day and leave the rest of the building unheated; use a space heater to warm the bathroom (keep it far from where water can get on it) when you have to shower or bathe; and put plenty of blankets on the beds.

    You can get timers and motion-sensitive switches for some lights. There’s a gadget you screw into the socket of a closet ceiling fixture, for example, that makes the fixture motion-sensitive. This solves the problem of wandering off and leaving the closet light burning. I think they work on some regular lamps, too. That would cause the lights to go out (eventually) after the kids leave a room.

    My former mother-in-law had one of those free-standing metal wood fireplaces put into her decrepit built-from-a-kit house in Colorado. The cost couldn’t have been that big a deal: she didn’t have a nickel or a dime to rub together. She had to have a brick pad put down on the floor to give it a fire-proof place to stand, and they punched a hole in an exterior wall (I think…or possibly the roof) and ran a metal pipe outside to serve as a chimney. As I recall, she was very pleased with it.

  13. MITBeta @ Don't Feed the Alligators Says:

    Very little real “geothermal” exists. This is what you would see near a place like the geyser fields at Yellowstone.

    What Mark is talking about above is more specifically a Ground Source Heat Pump. So if you already have a heat pump, then it’s either ground source or air source. Either way, you may want to try to find out if it’s already large enough to heat your whole house if only the distribution was in place. If it is, then this is great news because it effectively lowers your cost for electrical heating by as much as a factor of 4 depending on the seasonal average coefficient of performance.

  14. Ken Oatman Says:

    It strikes me that I haven’t seen the frugalista blogs like “Gather Little By Little” touch on the subject of renewable energy investments for the home.

    What if we all diverted money from our 401k’s long enough to buy a home power system? I went to a solar energy sales seminar the other day, and the salesman said a solar electric system had a 10-15% annual return. No one is getting anything like that in the stock market.

    A solar thermal system is the one that can help lower your heating bill. Yes, it takes an investment mentality, because the system won’t pay for itself for five years or more (unless energy costs spike up rapidly, again)…but isn’t that the kind of long-term thinking that incrementally improves the world?

    Permanently lowered utility bills sounds frugal to me. And I think we all like the idea of being more independent from the whims of energy costs.

    I wouldn’t mind seeing an article along these lines, someday…to include GLBL taking estimates on putting solar panels up on that all-electric roof, and reporting back to your congregation on the process and calculations.

    Thank you for educating me with your works.

  15. John Tedder Says:

    I would love to pay only 10.6 cents for a kWh. I live in New York, just a little south of the Adirondacks. We have the 3rd highest electric rates in the country, 19.48 cents per kWh. Only Hawaii and Connecticut are higher.

    I just wrote a post about it on my blog. It’s ridiculous. We have much longer and colder winters up here too. Half of my property is heated with propane and half is electric. Thanks for listening. I “dropped” on you too.

  16. MoneyTheory Says:

    I really hope for a day soon where solar, wind, and other alternative forms of energy are mainstream and affordable, viable options. Despite what is commonly heard, I feel it is 100% possible to have these options available for everyone, in one way or another, whether it is generated from large wind farms, solar, fields, hydroelectric plants, or from panels or wind turbines right at the home site, etc. We as a society can achieve this if we really demand it and the investment capital is put behind it to fund research. When it is developed, then maybe that will be the cheapest. Until then, electricity is the cheapest where I live.