Fuel oil vs. natural gas, which is winning on LI?

Plummeting oil prices in the fall of 2008 enabled Long Island's oil heat trade group to take out a newspaper ad saying, "Converted to Gas? Huge Mistake!"

This heating season, though, heating oil has risen by 13 percent over a year ago and, at about a current average $3.01 a gallon, costs the equivalent of about eighty cents a gallon more than gas, based on the fuel's energy contents in therms. Would converting still be a "huge mistake." Was it ever?

The oil people still argue that it is, because of the high upfront costs to convert and the uncertainty that gas will remain cheaper than oil. They contend a more efficient oil burner costs half as much as converting to gas and effects the same fuel cost savings.

While the gas people don't dispute the payback time argument, they claim other benefits for gas, including that it burns cleaner and that ample North American gas supplies suggest price and supply stability going forward.

Ira Tane, president of the Long Island Builders Institute and of Benchmark Home Builders of Huntington Station, said most new homes are being built with gas furnaces when possible. He thinks gas is more "versatile" in that it can be also used for cooking and to power fireplaces.

"If gas is available," said Tane, "it's the clear choice."

 Price difference
National Grid said the amount of gas equivalent to the 900 gallons of heating oil used each year by the average home would cost $1,981 at current rates. At current prices, 900 gallons of oil would cost $2,788 - $807 more.

But Kevin Rooney, chief executive of the Oil Heat Institute of Long Island, notes that the local average for oil has dropped six cents in the past week, suggesting that prices have peaked for this season. He notes that heating oil prices usually include a free service contract while a typical contract for a gas furnace is about $300. Heating and air-conditioning contractor Robert Von Hagen, president of Flynn-Aire of Kings Park, said he sells a basic plan for $200.

Even using Von Hagen's price, the fuel cost saving drops to $600 a year, which has to be divided into the cost of conversion to calculate the payback period.

Conversion costs include getting rid of or filling in the oil tank, removing the oil burner and, often, installing a chimney liner. That's needed to prevent loose particulate matter from blocking the flue vent.

$1,500 tax credit
National Grid encourages conversion with rebates. And if a homeowner opts for a more expensive, superefficient gas system, the federal government kicks in a $1,500 onetime tax credit. (There are oil burners also eligible for the credit, said Rooney.)

While plumbers say a gas system can be installed for $5,500 after discounts, prices can be much higher. Von Hagen said he just installed a high-end unit for $8,800 with no chimney liner and not including the cost of oil burner and tank removal.

With a $600-a-year fuel saving, a $5,500 upfront outlay would take 11 years to pay for itself. At $6,500, it would take 13 years. The upfront cost can be higher if there's no gas main near the house; National Grid runs only the first 100 feet free, then charges $70 a foot.

Lake Grove homeowner Jim Brickley said he is investing about $6,000, all told, to convert from oil to gas.

As a National Grid crew last week extended a main to his house, he said cleanliness and convenience were his main reasons for switching. "It's better for the environment; it's cleaner," he said, adding that his 20-year-old oil burner has been trouble-prone. "It's just a headache," he said.

Said Rooney, "There are no easy answers here."