Heating Cost by Fuel Type: How to Compare Properly
Updated 2026-08-16 · 8 min read
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Natural gas is priced by the therm. Propane and oil by the gallon. Electricity by the kilowatt-hour. Wood by the cord. Those units aren't remotely comparable, which is why almost every claim about which heating fuel is cheapest is unverifiable as stated.
There's one fix, and it's arithmetic: convert everything to cost per million BTU (MMBtu) of delivered heat.
How do you compare heating fuel costs?
Cost per MMBtu delivered = (price per unit ÷ MMBtu per unit) ÷ efficiency
Three inputs per fuel:
- What you pay per unit — from your own bill, not an average
- Energy content per unit — a physical constant
- Appliance efficiency — AFUE for combustion, COP or HSPF2 for heat pumps, roughly 1.0 for resistance
That third term is what people leave out, and it's why raw fuel prices mislead.
How much energy is in a therm, gallon or cord?
| Fuel | Sold by | Approximate energy content |
|---|---|---|
| Natural gas | Therm | 100,000 BTU (definition) |
| Natural gas | CCF | ~100,000 BTU (varies slightly with heat content) |
| Electricity | kWh | ~3,412 BTU |
| Propane | Gallon | ~91,500 BTU |
| Fuel oil (No. 2) | Gallon | ~138,500 BTU |
| Wood pellets | Ton | Varies by grade |
| Cordwood | Cord | Varies widely by species and moisture |
A therm is exactly 100,000 BTU by definition, which makes gas the easiest to work with. If your bill is in CCF (hundred cubic feet), it's close to a therm but not identical — utilities publish a heat-content factor, and many bills show both.
Cordwood is the hard one. Species and moisture content move the energy per cord enormously, and "a cord" may mean a full cord or a face cord. See wood and pellet stove heating cost.
How does appliance efficiency change fuel cost?
| Equipment | Efficiency measure | Typical |
|---|---|---|
| Non-condensing gas furnace/boiler | AFUE | ~80% |
| Condensing gas furnace/boiler | AFUE | ~90–98% |
| Propane furnace | AFUE | Same tiers as gas |
| Oil furnace/boiler | AFUE | ~80–90% |
| Electric resistance | — | ~1.0 (100%) |
| Heat pump | Seasonal COP | ~2.0–4.0 |
| Wood stove (EPA certified) | — | Published per appliance |
The heat pump line is the important one. A COP of 3 means it delivers three units of heat per unit of electricity — it isn't creating heat, it's moving it. That's why a heat pump competes with cheap gas despite electricity generally costing more per BTU at the meter.
Electric resistance can never exceed 1.0, which is why it's almost always the most expensive per unit delivered. See heat pump vs electric resistance heat and electric baseboard heating explained, and AFUE and furnace efficiency explained for the combustion side.
Worked examples
All figures below are illustrative arithmetic to show the method — not current prices. Use your own bills.
Natural gas at $1.20/therm, 95% AFUE: 1 therm = 0.1 MMBtu → $1.20 ÷ 0.1 = $12.00 per MMBtu of fuel ÷ 0.95 = $12.63 per MMBtu delivered
Electric resistance at $0.16/kWh: 1 kWh = 0.003412 MMBtu → 1 ÷ 0.003412 ≈ 293 kWh per MMBtu 293 × $0.16 = $46.88 ÷ 1.0 = $46.88 per MMBtu delivered
Heat pump at $0.16/kWh, seasonal COP 3.0: $46.88 ÷ 3.0 = $15.63 per MMBtu delivered
Propane at $2.80/gallon, 95% AFUE: 1 gallon ≈ 0.0915 MMBtu → $2.80 ÷ 0.0915 = $30.60 per MMBtu of fuel ÷ 0.95 = $32.21 per MMBtu delivered
In this illustrative set the ranking is gas < heat pump < propane < resistance. Change any input and the order can change — a lower electricity rate or a higher COP puts the heat pump first; a higher gas price does the same.
Run yours with the electricity cost calculator and your rate from the utility rates reference.
Why are heating fuel comparisons misleading?
COP isn't constant. A heat pump's efficiency falls as the outdoor temperature drops. The seasonal figure (reflected in HSPF2) averages this across a heating season, so use the seasonal number rather than a rating-point COP. In very cold conditions, a cold-climate model holds up much better than a standard one — see cold climate heat pumps and seer2 and hspf2 explained.
Backup heat changes the average. Many heat pump installations use electric resistance backup below a balance point. Every hour on backup is resistance-priced, so the blended seasonal cost sits above the heat pump's own figure. See heat pump backup heat explained.
Fixed charges. Most utilities bill a fixed monthly charge alongside usage. If you're comparing keeping gas service against going all-electric, dropping gas eliminates that standing charge entirely — which can be worth more than the per-BTU difference. See electrification and your electric bill.
Tiered and time-of-use rates. If your electricity price rises with consumption or varies by hour, one average rate misrepresents what you'd actually pay. Check your tariff.
Delivery volatility. Propane and oil are delivered commodities with prices that move; piped gas and electricity are tariffed. That's a risk difference, not just a price difference.
Distribution losses. Duct leakage into unconditioned space wastes heat regardless of source, and it applies to the delivered figure. Sealing ducts often returns more than switching fuels — see ductwork problems and cost.
Dual fuel: use both
If you have gas and are considering a heat pump, you don't have to choose. A dual fuel system runs the heat pump when it's cheaper and the furnace when it isn't, switching at an economic changeover temperature derived from exactly this comparison.
That changeover point is where the heat pump's cost per MMBtu — at that outdoor temperature, with its reduced COP — crosses the furnace's. See dual fuel heat pump systems.
Cost per MMBtu isn't the whole decision
The arithmetic answers running cost. It doesn't answer:
- Installed cost — see furnace installation cost and the heat pump cost calculator
- Whether cooling is included — a heat pump provides it; a furnace doesn't
- Equipment life and maintenance
- Comfort and capacity in extreme cold
- Resilience — what still works in an outage
- Whether you want to keep gas service at all
Put running cost and installed cost together with the heat pump payback calculator.
On rebates and incentives: programs exist at federal, state, local and utility levels and can change the installed-cost comparison substantially. Amounts, eligibility and availability change, so verify what currently applies to you with the administering utility or agency rather than relying on a quoted figure.
And reduce the load first
Every comparison above prices a unit of heat. The cheaper move is often to need fewer of them.
Air sealing and insulation reduce consumption regardless of fuel, and they pay back fastest where heat is most expensive — which is exactly where a fuel comparison would send you shopping. See how to air seal a house and attic insulation R-value guide. Do that work before sizing new equipment.
The bottom line
Convert every fuel to cost per million BTU delivered — price per unit, divided by energy content, divided by appliance efficiency — and the comparison becomes arithmetic instead of opinion. Electric resistance is almost always the most expensive because its COP is fixed at 1.0; beyond that, gas, a heat pump or wood can each win depending on your local rates. Use a seasonal COP rather than a rating-point figure, account for backup heat and fixed monthly charges, and reduce the load before you size anything.
Work it out with the electricity cost calculator and the heat pump payback calculator.
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