Propane vs Heating Oil: Which Is Cheaper to Heat With?

Propane vs heating oil comes down to price per BTU, not price per gallon: heating oil provides about 138,500 BTUs per gallon, and propane provides about 91,500 BTUs per gallon, so fuel oil’s higher heat content partly offsets its higher price per gallon. Both fuels heat well; the real winner depends on your local prices, tank configuration and efficiency.

Key Takeaways

• Compare cost per BTU, not cost per gallon. Heating oil contains approximately 138,500 BTUs per gallon; propane provides about 91,500 BTUs per gallon, so a gallon of oil does about 1.5 times the work of a gallon of propane when comparing propane vs heating oil.
• Efficiency closes the gap. Modern oil furnaces operate at 80-90%+ AFUE; propane furnaces operate at 90-98% AFUE. Propane’s higher efficiency can compensate for its lower BTUs per gallon.
• Installation and tank costs often decide this. Propane needs a tank (owned or rented) as well as a regulator and line; oil needs a tank, a filling pipe, and often a basement or outdoor location.
• Local prices tip the balance. Propane and heating oil are both regional products – the same comparison can be reversed between two neighboring states.
• Use a cost per BTU calculator (or the formula below) with your own recent quotes before committing.

propane vs heating oil cost

The cost of heating oil versus the price of propane is the question that really drives the decision, and the honest answer is that it changes depending on the region, the season, and how much you buy at one time. The only fair comparison for propane vs heating oil is the cost per million BTUs (MMBtu) delivered to your home, because the two fuels are sold in different units and burn at different rates.

Here is the calculation. A gallon of heating oil contains approximately 138,500 BTUs. A gallon of propane contains approximately 91,500 BTUs. So if heating oil costs $4.00 per gallon and propane costs $2.50 per gallon, the raw fuel cost is:

• Heating oil: $4.00 ÷ 138,500 BTU = approximately $28.88 per million BTU
• Propane: $2.50 ÷ 91,500 BTU = approximately $27.32 per million BTU

In that example propane edges ahead — but flip the prices and oil wins. This is why you should never trust a national average. Propane prices vary widely by region and by whether you own or lease your tank, and heating oil prices track crude oil and local dealer competition.

Two cost factors that top-ranking comparisons often gloss over:

1. Delivery minimums and fill sizes. Oil dealers often have minimum deliveries (commonly 100+ gallons), and propane companies may charge more per gallon for small “keep-full” top-offs than for a full tank fill. Buying in bulk usually lowers the per-gallon price for both fuels.
2. Tank ownership. If you lease a propane tank, you’re typically locked into that supplier’s refill prices. Owning your tank lets you shop multiple propane suppliers — a real money-saver over years.

For a deeper look at how fuel markets move, the U.S. Energy Information Administration (EIA) publishes weekly heating oil and propane price data by region, which is the most reliable free source for benchmarking your local quotes.

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propane vs heating oil btu

BTU (British thermal unit) is the great equalizer. One BTU is the heat needed to raise one pound of water by one degree Fahrenheit, and it lets you compare fuels that are sold in completely different units.

Fuel	BTU per gallon (approx.)	Typical furnace AFUE	Notes
Heating oil (No. 2)	~138,500	80–90%+	Higher heat content per gallon
Propane	~91,500	90–98%	Lower BTU/gallon, often higher efficiency

The bottom line: heating oil has more energy per gallon, but propane furnaces are often more efficient, so the gap in heat delivered is smaller than the raw BTU numbers suggest. A 90% AFUE propane furnace and an 85% AFUE oil furnace can be surprisingly close in annual cost.

propane vs heating oil btu per gallon

Propane vs heating oil BTU per gallon is the single most useful number to memorize. Heating oil delivers about 138,500 BTU per gallon; propane delivers about 91,500 BTU per gallon. That means one gallon of heating oil carries roughly 1.5 times the energy of one gallon of propane. If you’re comparing a $3.00 gallon of propane to a $4.50 gallon of oil, they’re nearly at parity on a BTU basis before efficiency is factored in.

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propane vs heating oil efficiency

Efficiency is measured in AFUE (Annual Fuel Utilization Efficiency) — the percentage of fuel energy converted to usable heat. The U.S. Department of Energy’s ENERGY STAR program sets efficiency benchmarks that homeowners should look for.

• Propane Furnaces: Typically 90-98% AFUE for condensing models. Propane burns cleanly and condensing units capture latent heat from the exhaust gases.
• Oil furnaces: typically 80-90%+ AFUE. Modern oil systems have improved, but condensing oil furnaces are less common and more expensive.

Higher AFUE means less fuel burned for the same warmth. A 96% AFUE propane furnace wastes only about 4% of its fuel as exhaust; an 85% AFUE oil furnace wastes about 15%. That efficiency edge is propane’s main argument in the propane vs heating oil efficiency debate.

is propane or heating oil more efficient

Propane is generally the more efficient fuel at the furnace level: propane furnaces regularly achieve an AFUE of 90 to 98 percent, while oil furnaces typically operate between 80 and 90 percent. But “more efficient” is not the same as “cheaper to operate”.

A highly efficient propane furnace burning more expensive fuel may still cost more per season than a mid-efficiency oil furnace burning less expensive oil. Efficiency is one input; price per BTU is the other, and you need both to answer the question.

is it cheaper to heat with propane or oil

Is it cheaper to heat with propane or oil? There’s no universal winner: it depends on your local prices per gallon and the efficiency of your equipment. In areas where propane is cheap and oil is expensive, propane usually wins; in the Northeast, where heating oil is common and competitively priced, oil often wins out. Run the numbers with current local quotes (see the calculator section) rather than relying on a national average, as the answer truly flips by state and even by town.

propane vs heating oil calculator

A propane vs heating oil calculator turns prices and efficiency into a single comparable number: cost per million BTU of delivered heat. You can build one in a spreadsheet or do it by hand with this formula:

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Cost per MMBtu = (Price per gallon ÷ BTU per gallon) ÷ AFUE

Concrete example, using round numbers:

• Propane: $2.60 ÷ 91,500 = $0.0000284 per BTU → ÷ 0.95 AFUE = about $29.90 per MMBtu
• Heating oil: $4.20 ÷ 138,500 = $0.0000303 per BTU → ÷ 0.85 AFUE = about $35.70 per MMBtu

In this example propane is cheaper to run. Change the prices and the result changes. To use the calculator well:

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1. Get your real local prices — call two or three suppliers for each fuel.
2. Use your furnace’s actual AFUE (it’s on the rating plate or in the manual).
3. Account for tank lease fees and delivery charges, which can add to the effective per-gallon cost.
4. Re-run it each season — fuel prices move.

how propane heating works

Propane heating works by storing liquefied petroleum gas (LPG) in a tank, where it’s kept as a liquid under pressure. A regulator releases propane vapor to your furnace, where it mixes with air and burns in a burner assembly. The flame heats a heat exchanger, a blower pushes air across that exchanger, and ductwork distributes warm air through your home. A thermostat signals the system to fire when temperatures drop.

Key elements of a propane heating installation:

• Storage tank — above ground or buried, sized according to the needs of your home.
• Regulator and supply line — controls vapor pressure to appliances.
• Furnace or boiler — burns propane at 90-98% AFUE in modern condensing units.
• Ventilation — condensing propane furnaces use PVC venting; older units use metal flues.

Propane also powers other appliances — water heaters, ranges, dryers, and generators — which is a genuine advantage if you want one fuel for the whole house. When considering propane vs heating oil, heating oil, by contrast, is essentially a single-purpose fuel for furnaces and boilers.

heating oil vs propane: installation and tank costs

Propane tank installation cost and fuel oil tank configuration are where the two fuels diverge the most and where a lot of the real money is hidden when comparing propane vs heating oil.

Propane tank installation cost depends on the size of the tank, whether above ground or in-ground, and whether you purchase or rent:

• Rented tanks are often installed for free or at a lower cost, but you are tied to that provider’s refill prices.
• Owned tanks cost more upfront but allow you to purchase from multiple vendors - usually the best game in the long run.
• Buried tanks cost more to install and require permits and locating.
• Aboveground tanks are cheaper and easier to maintain.

Heating oil tanks are typically 275-gallon indoor tanks or larger outdoor tanks. Costs include the tank itself, a fill pipe, a vent, a gauge, and often a containment or leak-detection setup. Many states require leak protection for oil tanks, and older tanks may need replacement — a significant expense that propane setups avoid.

A rule of thumb: If you are building a new system or replacing a system, consider the cost of tank, installation and first fill for both fuels before comparing fuel prices. Cheaper fuel per gallon can lose out if tank and installation costs are much higher.

How to decide: propane vs heating oil

Use this decision checklist:

1. Get local prices for both fuels and run the cost-per-MMBtu formula.
2. Check your furnace AFUE — a high-efficiency unit changes the math.
3. Weigh tank and installation costs, including lease vs. own for propane.
4. Consider whole-home fuel use — propane can run water heaters, ranges, and generators; oil can’t.
5. Check local availability and dealer competition — more suppliers usually means better prices.
6. Think about longevity — propane furnaces are common and serviceable nationwide; oil is concentrated in the Northeast.

For authoritative background on the fuels themselves, see the Wikipedia entries on heating oil and liquefied petroleum gas, and for efficiency standards, the U.S. Department of Energy’s ENERGY STAR furnace guidance.

Sources & Further Reading

• Heating oil — Wikipedia: Heating oil is any petroleum product or other oil used for heating; it is a fuel oil. Most commonly, it refers to low viscosity grades of fuel oil used for furnaces…

Frequently Asked Questions

propane vs heating oil cost — which is cheaper?

Neither wins everywhere. Heating oil has more BTU per gallon (about 138,500 vs. propane’s 91,500), but propane furnaces are often more efficient (90–98% AFUE vs. 80–90%). The cheaper fuel depends on your local per-gallon prices and your equipment, so compare cost per million BTU using current local quotes.

propane vs heating oil BTU — how do they compare?

Heating oil contains roughly 138,500 BTU per gallon; propane contains about 91,500 BTU per gallon. That makes a gallon of oil about 1.5 times as energy-dense as a gallon of propane, which is why oil’s higher per-gallon price doesn’t automatically make it the more expensive fuel.

propane vs heating oil efficiency — which is more efficient?

Propane furnaces are generally more efficient, commonly reaching 90–98% AFUE, while oil furnaces typically run 80–90% AFUE. Higher efficiency means less fuel wasted as exhaust, but efficiency alone doesn’t determine running cost — fuel price matters just as much.

Is it cheaper to heat with propane or oil?

It depends on regional prices and your furnace’s efficiency. In the Northeast, where heating oil is widely used and competitively priced, oil often wins; in areas with inexpensive propane, propane usually wins. Run a cost-per-MMBtu calculation with your own local quotes to get a real answer.

How does propane heating work?

Propane is stored in liquid form in a pressure tank. A regulator releases steam to the oven, where it mixes with air and burns, heating a heat exchanger. A fan then pushes air through the exchanger and through your ducts to warm the house.

What is the propane vs heating oil calculator formula?

Cost per MMBtu = (price per gallon ÷ BTU per gallon) ÷ AFUE. Plug in your local prices and your furnace’s efficiency rating to compare the two fuels on equal footing. Re-run it each season, since fuel prices change.

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