Heating oil vs. natural gas

Oil is bad for environment and costs too much

HOPEFULLY, NEW ENGLAND WILL BE LUCKY this winter.  No Polar Vortex. No endless snowstorm piling nine feet of frozen fluff on Boston. But whatever our luck, there are certain unavoidable facts of life that every New Englander will experience this winter.

Even the staunchest New England opponent of increased natural gas pipeline capacity cannot dispute that: (1) winter is coming; (2) our winters get darned cold; and (3) the typical New Englander again will pay a lot more for home heating than the typical resident of every other state but Alaska.

The Energy Information Administration’s recently released its “Short-Term Energy and Winter Fuels Outlook,” which shows regional heating fuel market shares in colorful pie charts.  While heating oil/kerosene is a barely visible “sliver of the pie” in the Midwest, West, and South (maybe 1-2 percent), it is a very unhealthy portion of the Northeast’s (New England, New Jersey, New York, and Pennsylvania) “dessert” at a stunning 25 percent.

In New England, reliance on oil is even greater. The percentage of households heating with oil is 64.2 in Maine, 46.1 in New Hampshire, 43.8 in Vermont, 43.7 in Connecticut, 32.6 in Rhode Island, and 29.2 in Massachusetts. The national average is just 5.5 percent, driven up by New England.  Massachusetts consumes the third-most residential heating oil of any state. Connecticut ranks fourth.

Beyond the environmental harm from inefficiently burning heating oil, why is New England’s “pie” so unacceptable?  Because it costs much more than everyone else’s, and for no good reason.

According to the Energy Information Administration, on a million British thermal unit basis (MMBtu), delivered oil is consistently more than twice as expensive as delivered natural gas.  Delivered oil cost over $30 in 2013-14, about $24 in 2014-15, and is projected to cost $22 in 2015-16.  The price of delivered natural gas was less than $10 in 2013-14, dropped slightly in 2014-15, and is projected to fall to around $9 in 2015-16.

What does this mean for a typical New Englander?  The Energy Information Administration says a Northeast household consumes 850 to 1,200 gallons of heating oil in winter.  In 2013-14 (the Polar Vortex winter), that oil cost $3.88/gallon.  Thus, Northeast homes using oil spent about $3,298 to $4,656 on heating.  A Northeast household using natural gas consumed 84.1 thousand cubic feet (Mcf) at $11.55/Mcf, for a total cost of just $971.  If yours is one of the roughly 40 percent of homes stuck using heating oil, you could have spent $3,685 more than your neighbor on heating.  Compared to your sister in Ohio using natural gas ($766), you could have spent $3,890 more.  Compared to your cousin in Oregon ($460), you may have spent $4,196 more. How is that acceptable?  Have we failed some regional IQ test?

Some public officials say that natural gas pipelines aren’t needed and that crashing oil prices will help.  Not so, says the Energy Information Administration,, which projects delivered oil to cost about $3.04 this winter.  That means you may only pay $3,648 to heat your home.  What a reprieve, surely indicative of a functional energy paradigm! Meanwhile, your neighbor using natural gas will spend about $921 and fall off his couch laughing.

The story these numbers don’t tell is that even natural gas prices in New England are far higher than anywhere else in the nation, due to our natural gas pipeline constraints.  The natural gas statistics above use consumption and price data for the “Northeast,” which includes New York, New Jersey, and Pennsylvania, and all of which have greater access to and cheaper prices for natural gas than New England.  Don’t let the inclusion of these states fool you.  For example, in New England the price of natural gas at the Algonquin Hub was $18.86/Mcf for winter 2013-14, far higher than the Northeast price of $11.55/Mcf, the Midwest price of $8.70/Mcf, and the West price of $9.96/Mcf.  These exorbitant costs will trickle down to consumers as higher delivere- gas prices over time.  If you’re stuck using oil, the difference between your heating bill and that of your neighbor using natural gas may decrease.  But that doesn’t make you any better off and only hurts your neighbor.

Another critical fact is that a large proportion of people forced to use oil, and some who use natural gas, desperately need public heating assistance.  For example, Massachusetts provided low-income heating assistance to over 183,000 households in 2014, has a 2015 LIHEAP budget of over $146 million, and rarely has enough money.  The Massachusetts Department of Housing and Community Development found: “The rising cost of heating oil and high utility prices disproportionately affect the low-income population of the Commonwealth” and “that households with income below 100 percent of the Federal Poverty Level spend … 8.5 percent to 10 percent [of their income] on home heating bills alone.”  Connecticut’s Consumer Advocate reported recently that one-sixth, or 218,850, of Eversource’s Connecticut customers are non-hardship customers who cannot afford to pay their bills.

Here are the most telling facts.  On a typical New England winter day, we use 3.4 billion cubic feet (Bcf) of natural gas to heat homes and businesses.  On a cold day, we use 4.5 Bcf just for heat.  But we have only 3.6 Bcf/day of pipeline capacity to bring natural gas into New England.  We need 1 Bcf/day of gas for electricity generation, leaving us about 2 Bcf short of gas on scores of days.  This chilling arithmetic doesn’t account for the hundreds of thousands of consumers scrambling to get off oil and onto gas.

The inescapable fact of life for winter in New England is that we need adequate natural gas pipeline capacity to meet our heating needs cleanly and affordably, and to meet our electricity needs without running dirty, expensive coal and oil plants.  Both Kinder Morgan’s and Spectra’s pipeline projects are necessary to meet our heating needs, get off oil and coal, and reduce our carbon footprint.

Let’s all hope for luck this winter.  Luck, however, is not an energy policy, and it is not an ethical policy.  Those of us who are more fortunate might well consider the consequences of our energy inaction for those upon whom luck has not smiled.

Meet the Author
Meet the Author
Anthony Buxton is chair of the Energy Group and Benjamin Borowski is an attorney at PretiFlaherty, a law firm affiliated with the Coalition to Lower Energy Costs, which has close ties to natural gas pipeline companies and groups that support pipeline expansion in a bid to lower power prices.

  • dorsett

    Building a big pipeline is a bit like re-plumbing the gas mains your house to supply a bigger tankless gas burners so that 5 people can take a shower at one time, rather than buying a bigger hot water tank or agreeing to not all shower at the same time.

    Yes, a bigger supply pipe is a POSSIBLE solution, but is far from being the ONLY solution. To get to the best solution requires a more robust discussion about whether or not the capital assets risk becoming stranded in the face of rapidly evolving power grid sources & control, and whether (and if so how much) the ratepayers should be shouldering any of that risk rather than the shareholders/investors.

    At the margins local storage is cheaper than a bigger-bore supply, and even THAT might not be necessary if better demand response programs were in place with the utilities which would cost even less. A bigger supply is rational if massive growth is anticipated, yet electricity demand overall is flat or (even falling) in the region, and natural gas is not the only viable option for new power generation.

  • Judith Parks

    This may be true, but do not think that expanded pipeline capacity alone can make this change. We live on street without natural gas, and the South Shore supplier has no interest in making gas available for our homes. They told us it would cost $12K to bring the line less than .25 miles. So…12 homes have no access to gas without a huge personal investment. How does increased pipeline capacity help us be free from heating oil?

  • John McKenzie Jr

    How about these state assistance heating programs put the hard earned tax payer dollars into creating more efficient homes (pre-1980’s) instead of dumping it all into the fuel cost assistance programs. This way the future consumption numbers will dramatically be reduced. Other options are alternative incentives for homeowners who have no choice but to heat with oil. The fact remains this: A more efficient (air sealed & well insulated) envelope will reduce consumption, no matter what the fuel being used is. Using my own example… I fill my oil tank once every 8-10 months… how is that possible? Because I’ve taken the initiative to make the envelope of my home more efficient, coupled with alternative heating sources like a wood pellet stove. Over a six year period (2008 thru 2014), I have seen allocated savings averaging at almost $1100 per year based upon the energy efficiency upgrades made in my home. This also includes local utility, state and federal energy efficiency rebates solely based upon those upgrades.

  • John McKenzie Jr

    Additionally, if the EPA is going to continue this strangle hold (thank you President Obama) on what homeowners can or cannot use to heat their homes, then this “so called” heating oil vs. natural gas epidemic will continue to spiral downhill.

  • Pat Brady Martin

    As Mark Twain said, “There are lies, damned lies, and statistics.” First of all, oil is being delivered today at $2.09/gallon. The following is from the NH Oil Heat Council,


    We
    have been working on some calculations to determine the Payback for
    customers to convert to Natural Gas. It is difficult to find out exactly
    what the cost per therm is for
    Liberty Utilities so we based the pricing on a weighted average for 12
    months.

    From our research it appears Liberty is charging 1.19 for Gas and Distribution with a $22.04 Monthly Service Charge.

    In comparison if a customer uses 800 gallons of heating oil the equivalent in therms would be 1104 therms.

    The total cost including the monthly service charge would be 1104 X 1.19 = 1313 + 264 Annual Service Charge Total $1577

    If Heating Oil is 2.09 per gallon the annual cost would be $1672.

    The annual savings would only be $95.

    The average cost to convert your heating system to Natural Gas could be as much as $9000 on average.

    Based on the above information the payback in years would be about 95 years.

    Unfortunately, no one can predict what the pricing for Natural Gas and Heating Oil will do over the next several years.

    There
    are some options for consumers to replace their current Oil burner with
    a Natural Gas burner that could be less expensive and these conversion
    can run from $1500 to $2500.
    At a cost Of $2500 the payback would be 26 years based on the current
    market.”

  • Pat Brady Martin

    It appears to me that Attorney Buxton (who, btw, claims he is NOT involved in the Massachusetts effort on behalf of Kinder Morgan) makes an excellent argument for why New England Electricity Ratepayers should NOT be on the hook to pay for the construction costs of these pipelines; the bulk of the additional gas will go to home heating needs. Let the gas utilities like Eversource, National Grid, Liberty Utilities and Berkshire Gas pay for the pipeline construction if they can actually justify it! Every time the gas utilities add a heating customer, they make the “bottleneck” during the winter worse. Currently half of the capacity on the NED and Access Northeast pipelines are reserved for gas suppliers (Eversource and National Grid are both gas utilities as well as electric) with no actual electric generators signed on. Unlike the steady state demand for gas by electricity generators, gas for heating fluctuates with temperature in a non-linear relationship. A 10% increase in Heating Degree Days can result in a 30% increase in fuel usage from my experience tracking my towns usage on the EPA’s Portfolio Manager tool. Signing up gas heating customers and promising to lower electricity prices with gas generation work at cross purposes.
    Most important is the argument about how New York pays so much less for gas compared with New England and that adding pipeline capacity will translate into lower electricity rates. Why then does the eia.gov pricing for July show that New York pays higher electricity rates than most of the New England states (including Mass and NH)? http://www.eia.gov/state/rankings/?sid=US&CFID=8690008&CFTOKEN=255210d6ad55baae-AF605E8D-5056-A34B-9248672BE7CF9D72&jsessionid=8430b8f945da038adbb8807c50060763b502#/series/31
    The arguments for adding pipelines and how they will “help” struggling families with energy costs are about as convincing as trying to pass off the Coalition to Lower Energy Costs as a consumer advocacy group! Preti-Flaherty even helps them buy their television ads!