Heat Pumps vs. Heating Oil: Which Is Most Efficient?
Last edited
Author
Andrew Blok
Electrification and Solar Writer and Editor
Editor
Andrew Giermak
Solar and Electrification Writer and Editor
If you're a homeowner in a chillier region still relying on heating oil, you might be wondering why all the fuss about modern heat pumps.
For years, oil was the go-to for serious winter heat. But here's the deal: heat pump technology has come a long way. Today's heat pumps are incredibly energy-efficient, all-in-one systems that provides clean, affordable heating and cooling, even in very cold temperatures, and often at costs below heating oil furnaces.
For many homes, a modern heat pump is simply the smartest option available. So, how exactly does this electric marvel stack up against your reliable oil system? And what critical factors should you weigh before making that upgrade?
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What is a heat pump?
Heat pumps work by moving heat into or out of a home or building, providing heating and cooling in one system. Heat pumps move heat with a refrigerant moving through a sealed coil and a cycle of compression (to heat up) or expansion (to cool down). A fan sends air over the coil to heat or cool the house.
Most residential heat pumps are air-source heat pumps, transferring heat between a home and the outside air. There are ground-source or geothermal heat pumps, too, which transfer heat between a house and the ground. Heat pumps can work in a ducted or ductless, or mini-split, system.
Air-source heat pumps can run at about 300-400% efficiency, meaning they transfer three or four times the heat energy as the energy (electricity) they consume. Geothermal heat pumps can reach over 500% efficiency.
What is heating oil?
Heating oil is refined crude oil similar to diesel fuel. There may be additives meant to help prevent corrosion or improve efficiency, and some heating oil may be blends of oil and biofuels.
In the US, heating oil is used the most in the northeast. According to the Energy Information Administration, 82% of the homes using heating oil as primary heating fuel are in New England, New York, New Jersey, and Pennsylvania. Heating oil can be used for space heating and water heating.
A home uses about 800-1,200 gallons of heating oil a season according to Pioneer Oil and Propane in Massachusetts. Heating oil cost $3.56-$5.13 a gallon in the U.S. from October 2025 to March 2026, according to the Energy Information Administration.
The main advantage of using heating oil for home heating is the heating power it puts out. Heating oil creates a lot of heat energy per BTU (British thermal unit). Fast, powerful heat is important in a New England winter. Heating oil burner systems are durable, often lasting longer than 25 years. Heating oil, in its liquid form, isn’t explosive and won’t ignite until it’s in the burner system, so some consider it safer than natural gas or propane.
Drawbacks of heating oil include the cost and price volatility. Experienced heating oil users often buy it in the offseason and avoid the demand of the fall and winter. You must store heating oil in a large tank on your property, which can add maintenance needs, cost, and risk of leaks or spills. While providing dependable heat, heating oil is not efficient with an energy efficiency rate of about 65-90%. While cleaner heating oil exists, burning it still emits greenhouse gases, notably carbon dioxide.
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Heat pump vs. heating oil
Modern heat pumps are an efficient heating and cooling option, including in the cold-weather areas where heating oil has been the traditional heating choice. Cold climate heat pumps are tested and certified to work and maintain a high level of efficiency down to very cold temperatures.
Going from heating oil to a heat pump could save Americans $923-$2,822 a year in utility costs, according to data from the U.S. Department of Energy. The savings tend to be more in homes with better insulation, depending on the age and efficiency of the old heating system, and electricity rates with your utility.
When would switching to an electric heat pump be a better year-round system for your home?
| Heat pump | Heating oil | |
|---|---|---|
| Efficiency | Often 300-400%, can be over 500% especially with geothermal heat pumps | 65-90% |
| Functionality | Heating and cooling | Heating |
| Fuel source | Electricity | Fossil fuel |
| Fuel tank | No | Yes |
| Emissions | Low (with grid electricity) or none (with home solar panels) | Higher |
Will a heat pump work for you?
More homeowners in all regions of the country are switching to heat pumps to save money and energy. It’s important to consider your energy costs, incentives which may be available for a heat pump, and your usual heating and cooling needs. If you’re looking to avoid the upfront cost or the hassle of scheduling maintenance and service, a heat pump lease through Palmetto's Comfort Plan, could work best for you.
A heat pump is a natural complement to home solar power and home electrification plans. Download the Palmetto app to learn more about energy saving moves you can make at home, and earn rewards on the devices that can help you make them. Get a quote for a new HVAC system and estimate your savings with solar.
See how much you can save with a new HVAC system from Palmetto
Frequently asked questions
If my home uses heating oil, will switching to a heat pump save me money?
Choosing a heat pump vs. oil heat could save you money. Greater efficiency and fewer systems to maintain could reduce your costs.The price of heating oil, installation costs, available incentives, your heating and cooling usage, and the temperature outside will all affect your overall operating costs.
What’s the most efficient way to heat a home?
Heating with a heat pump is the most energy-efficient heating system for the large majority of homes. Home solar panels can make it more cost effective and environmentally friendly.
Is it worth buying a home with oil heat?
Oil heating is a common way to heat a home, especially in the northeastern United States, where it used to be one of the better options for dealing with harsh winters. Cold climate heat pumps are gaining traction in cold locations, like Maine.
Lead photo by Alex Perz via Unsplash
Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.
