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Home heating oil – is it still worth it?

While alternative heating methods such as ground or air heat pumps and solar-powered hot water are becoming more popular, most people in the UK still heat their homes with ‘conventional’ sources such as fuel oil, coal, gas, or electricity. Of those, roughly three and a half million are heated with oil. Industry predictions point to price and availability problems worsening over time, so if you’re heating with oil at the moment you should be thinking about moving to an alternative soon. Already expensive, it’s only going to get worse.

Aside from the cost there are other good reasons why you should not choose oil to heat your home and provide your hot water. Of course, if you already have a boiler and tank installed, you may feel bound to continue using it – but bear in mind that there are no government ‘feed in tariffs’ available.

Heating oil is a non-renewable resource that releases carbon dioxide when burned, contributing to global warming. So, it’s not a clean energy source. It’s a toxic chemical, so if either the storage tank or any of the pipes leak, it’s highly polluting to the immediate environment – i.e. your property. Aside from the cost of the oil itself, the equipment required – the boiler, pipes and storage tank – and the installation of the same, are all very expensive (see below). As heating oil is delivered by road, it’s possible that you’ll run out while you wait for the next delivery. Many people who use heating oil have either run out at some point or come very close to doing so – and of course, this will happen in the middle of winter, not summer.

domestic oil tank, image

A leaking oil tank or pipe can result in pollution very close to home

The price of heating oil itself is already very high, and it has gone up dramatically over the past several years. An estimate by a well-known online consumer report group says heating and hot water will typically cost around £850 annually for a typical 3-bedroomed, semi-detached and well insulated home.

Equipment cost

New boilers start at around £1900 but can be much more expensive. Installation, by qualified engineers, is extra. A new, approved storage tank will cost between £330 – £850 (depending on type). These are not pretty. As an alternative you can purchase ‘underground’ models, but these are much more difficult to repair if the need arises. Theft from domestic oil tanks seems to be increasing along with the price of oil.

The rising cost of oil

Between 1990 and 2000, the price of a barrel of crude oil fluctuated either side of $20 but didn’t stray very far from it for the entire decade. From 2000 to early 2008 it increased in cost by roughly 30% annually. For the first half of 2008 it increased very sharply from around $100 per barrel to almost $150 followed by a substantial crash, along with everything else affected by the global financial crisis. Since then it’s rebounded quickly and once again hovers close to $100. If you draw a line through the fluctuations, it’s a grim picture: an ascending curve that will quite possibly break through the 2008 record within the next two years.

The oil used in domestic home heating systems, also known as fuel oil, is extracted directly from crude oil. After petroleum, it’s the second largest ‘cut’ and comprises roughly 25% of the crude oil from which it’s distilled. It’s commonly delivered by tanker truck and stored in above-ground storage tanks (‘ASTs’), located somewhere close to the building housing the boiler.

Oil-fired boilers need to be serviced annually, as parts such as the jets need to be periodically replaced to ensure efficient combustion of the fuel. This has to be done by a qualified engineer.

Renewable, vs. non-renewable

Oil, coal and gas are all fossil fuels. Burning them means depleting a resource which can never be replaced, as well as releasing into the atmosphere carbon which was stored millions of years ago – so they’re not carbon-neutral. However, heating with wood, which only releases the carbon stored in the recent past (i.e. while the wood grew) is considered to be carbon neutral.

oil storage tanks, image

Not exactly a pretty sight - fuel oil storage tanks

Heating oil accounts for about 25% of the yield of a barrel of crude oil, the second largest “cut” after gasoline (petrol). But, ‘peak oil’ is upon us and prices of all fossil fuels are rising as never before. To make matter worse, a recent Office of Fair Trading (OFT) investigation into websites comparing heating oil prices has identified failings including false testimonials and incomplete information.’ It would also appear that heating oil suppliers hike prices sharply when the weather turns colder. The Watchdog Consumer Focus said that ‘heating oil customers were left with huge bills last winter after oil price spikes’. “We would urge anyone worried about the cost of heating oil to buy before winter kicks in to avoid paying peak prices,” said Adam Scorer, from the watchdog.

So, while it may be your best bet until you install something better, it’s not really a very good source of heating at all: it’s not green, it’s not cheap, it’s the source of a lot or industrial and domestic pollution, and there are periodic shortages. And, given the way the cost of energy is increasing, if you’re heating with oil at the moment you should be thinking of where you want to be in five years time. For now, if you have to buy heating oil, buy it before winter sets in – or you’ll end up paying much more for the same amount of heat.

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9 Responses to “Home heating oil – is it still worth it?”

  1. Gavla says:

    Before penning this article showing the use of home oil in such a dark light, how about some thought for those of us who have no alternative nor any imminent replacement?
    Gas and power companies are not interested in running gas to where i live as it not financially viable, and more to the point will not be profitable.

    So, Mr Author – write about that – or at least give it some reference before you script something so bias it can’t lean any other way than down!

    • Mark Gatter says:

      Hi Gavla,
      Sorry to be the bearer of bad news, but a move from oil to gas would just be swapping one problem for another. There really is NO good news about fossil fuels. They’re expensive now, and will become more so as time goes by. If there’s any way at all to move to some greener alternative, the sooner the better.

      I understand your position as most of my home heating still relies on oil. However, we’ve planned our alternatives for a while now and have installed a woodstove (in which we’ll eventually burn sustainably-grown willow from our own property) and a 3.8 kW solar array which went in just before the government slashed the FIT payments. The cost for both these was seriously scary, but as we firmly believed that switching from oil (or gas, which we don’t have either) to solar and home-grown wood really is a case of ‘the sooner, the better’, it had to be done. The sad fact is, if I’d had anything at all good to say about oil or gas heating in my article – I would have said it.

  2. Susan Hilland says:

    We installed an airsource heat pump together with two solar thermal panels in October rather than renew our oil boiler. We also thought we were getting pv panels under the rent a roof scheme but when they came to fit them they decided it would be too costly for them as we have had the inside of our roof sprayed. We then thought we were getting a small wind turbine but this time the drainage commissioners have objected – sometimes the odds against you going green are just too high. However the heat pump is great and the solar water heating is more effective than I thought possible.

  3. Mark Gatter says:

    Airsource and solar hot water – what a great combination! And you didn’t miss out on very much re. the ‘rent a roof’ scheme as all the FIT profits would have gone to the installers. It’s a pity about the wind turbine, though…

  4. Adrian Pexman-Cock says:

    Is there a bio-substitute, for 28 second kerosene?

    • Andy McKee says:

      That’d be biodiesel, but the real question here is how much modification would your boiler need to burn it, and what mix would you need to buy. Most CH engineers still aren’t skilled up to do the conversion, but there’s a fair bit of info on th’interweb. Good luck!

  5. Neil Turner says:

    A rather depressing article, and a little one-sided. I say this as one who has 4KW of solar over, solar hot water, a log burner, good insulation and oil fired heating. Our annual spend on oil for a large sprawling 5 bed home is around £500. Switched off completely between May and October, and runs for a couple of hours a day over the winter.

    Being out in the sticks oil is our fallback. It is daft to suggest that running out comes as a surprise. Most people order July-August as it is cheaper then and beats the winter rush. People who panic buy in January have failed to prepare.

    I would also suggest that with shale gas coming on stream, the UK will have a source of heating oil for the future

    My advice is invest £500-1000 on insulation – it will pay for itself quickly. Fit a log burner, these needn’t be expensive. Order your oil late summer. Also, if you have money sitting in your pension, draw some out and invest in solar pv for a better rate of return

  6. Neil Turner says:

    Should have also mentioned I made my investment purely as a financial and self-sufficiency move. I don’t subscribe to the global warming myth, and have no interest in ‘saving carbon’

    • Andy McKee says:

      Thanks Neil – very good advice with the insulation of course. Naturally you can buy your annual supply in August when demand (and price) are low, provided you have a large enough tank for the year’s supply – but if there’s an unusually cold winter (such as 2011-12) you may get caught out before the price falls again. Shale gas production will probably slow down the rate of price increase for gas in the UK, but doesn’t produce oil – so the price differential between gas and oil will increase over time. For properties not on mains gas, oil is still cheaper than LPG – but for how long?

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