What is the cheapest fuel to heat a house?

Natural gas is typically the cheapest fuel per BTU where available, costing $10–19 per million BTU. Heat pumps are close behind at $15–29 per million BTU and are cheapest in areas with low electricity rates. Heating oil ($28–40/MMBTU) and propane ($27–38/MMBTU) cost significantly more. Electric baseboard ($44–88/MMBTU) is the most expensive option.

How much does it cost to heat a 2,000 sq ft home?

For a typical 2,000 sq ft home in the Northeast (5,500 heating degree days), estimated annual heating costs are: natural gas $1,000–$1,500, heat pump $1,400–$2,200, heating oil $2,200–$3,200, propane $2,100–$3,000, and electric baseboard $4,000–$7,000. Costs vary significantly by location, insulation quality, and local fuel prices.

Is it cheaper to heat with oil or propane?

Oil and propane costs are similar in many markets. Oil produces more BTUs per gallon (138,500 vs 91,500) but typically costs more per gallon. At $4.00/gal oil vs $2.50/gal propane, the cost per million BTU is roughly comparable: oil at ~$34/MMBTU vs propane at ~$30/MMBTU. The best choice often depends on which fuel has more competitive local suppliers.

What is the most efficient home heating system?

Heat pumps are the most efficient heating systems, delivering 2–4 times more heat energy than the electricity they consume (COP of 2.0–4.0). Geothermal heat pumps are even more efficient (COP 3.5–5.0) but cost $15,000–$30,000 to install. Among combustion systems, natural gas condensing furnaces (95%+ AFUE) are the most efficient, followed by oil boilers (85% AFUE).

Heating Oil Basics → Cheapest Way to Heat

What's the Cheapest Way to Heat Your Home?

There's no one-size-fits-all answer. The cheapest fuel depends on your location, your home, and what infrastructure you already have. But the math is straightforward — and it usually points to one of two fuels.

Check prices in your area: Compare Costs

All Fuels Ranked by Cost per Million BTU

Cost per million BTU (MMBTU) is the fairest way to compare fuels. It normalizes for the different energy content and efficiency of each fuel type.

Rank	Fuel	Typical Price	Efficiency	Cost/MMBTU
1	Natural Gas	$0.90–$1.80/therm	93%	$9.70–$19.40
2	Heat Pump	$0.15–$0.30/kWh	COP 3.0	$14.70–$29.30
3	Propane	$2.00–$3.00/gal	90%	$24.30–$36.40
4	Heating Oil	$3.50–$4.75/gal	85%	$29.70–$40.40
5	Electric Baseboard	$0.15–$0.30/kWh	COP 1.0	$43.90–$87.90

Natural gas wins on operating cost wherever it's available. Heat pumps are second — and sometimes first in areas with cheap electricity. Electric baseboard is always the most expensive.

Compare with your local prices: Use our Heating Cost Calculator to see exact costs for your ZIP code based on real local fuel prices.

Annual Cost Estimates

For a typical 2,000 sq ft home in the Northeast (~5,500 HDD):

Fuel	Annual Cost	Monthly (Heating Season)
Natural Gas @ $1.40/therm	$1,180	$197
Heat Pump @ $0.22/kWh	$1,660	$277
Propane @ $2.50/gal	$2,340	$390
Heating Oil @ $4.00/gal	$2,630	$438
Electric Baseboard @ $0.22/kWh	$4,980	$830

But It's Not Just About Fuel Price

The cheapest fuel to run isn't always the cheapest choice overall. Three factors matter:

1. What You Already Have

If your home already has an oil boiler and no gas line, the cost to switch includes installation — not just fuel savings. A perfectly working oil system with competitive local prices may be cheaper overall than converting to gas when you factor in a $10,000 installation.

2. Infrastructure Availability

Natural gas requires a gas line on your street — unavailable in many rural areas
Heat pumps work everywhere with electricity but need professional installation
Oil and propane work anywhere with truck delivery access

3. Upfront Cost vs Operating Cost

Switching To	Install Cost	Annual Savings vs Oil	Payback
Natural Gas	$5,000–$15,000	~$1,450/yr	4–10 years
Heat Pump	$7,000–$15,000	~$970/yr	7–15 years

Rebates and tax credits can dramatically shorten payback — especially for heat pumps (federal 25C credit up to $2,000, plus state programs).

Quick Decision Guide

Gas available on your street? Gas is almost certainly the cheapest operating cost. Convert if you plan to stay 5+ years.

No gas, currently on oil? Adding a heat pump alongside your oil system captures most of the savings without the full conversion cost. Use the heat pump for 80% of heating, oil for the coldest days.

Electric baseboard? Switch to literally anything else. A heat pump has the fastest payback (2–4 years) and also adds air conditioning.

Staying with oil? The single biggest thing you can do is shop for competitive prices. The spread between the cheapest and most expensive local supplier is often $0.50–$1.00/gallon — that's $250–$500/year on the same fuel.

The Bigger Picture

Energy prices change. Oil spikes during cold winters, gas prices follow natural gas markets, and electricity rates vary dramatically by state ($0.11/kWh in North Dakota vs $0.35/kWh in California). The "cheapest" fuel today may not be the cheapest in five years.

The safest long-term bets:

Natural gas where available (consistently cheapest over the past 20 years)
Heat pumps in moderate climates or as a supplement to any fuel
Insulation and weatherization (reduces cost regardless of fuel — the cheapest BTU is the one you don't need)

Detailed Comparisons

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