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Conversion to Natural Gas? Too Good to Be True

Money Natural gas utilities are working hard to convert Oilheat customers to natural gas while they have a temporary price advantage. We strongly recommend that you resist the hype and stay with Oilheat, because it will continue to offer the best combination of value, safety and service. To find a full-service Oilheat company in your area, use the search function to the right or see the full list of DVFDA Dealers.

Pricing Won't Last

Natural gas prices were attractive in 2012, but there is every reason to expect prices to climb in the years ahead. When one fuel gains a price advantage like the one that natural gas recently experienced, users flock to the fuel to take advantage of the potential savings. Natural gas is already expanding into emerging markets, and price increases are sure to follow. As of December 2013, natural gas futures are trading at above $4.00 per million BTUs, more than double the low they hit in April 2012. Prices are predicted to continue rising through 2040.

Here is a look at some of the key market forces that are likely to drive up the cost of natural gas.
  • Electricity generation: Power producers across the U.S. are switching from coal to natural gas to reduce emissions. NaturalGas.org reports that 80 percent of all power generation capacity added in the U.S. between now and 2035 will be powered by natural gas.
  • Exports: Natural gas producers are trying to raise prices by exporting gas to other countries where prices are higher. Twelve liquefied natural gas (LNG) plants and shipping terminals are already under construction or in the planning stage. In Asia, for example, prices are six times higher than in the U.S. By selling LNG abroad, gas producers hope to get higher prices than they are now able to charge in the U.S.
  • Transportation: Manufacturers are producing trucks and buses that run on natural gas, and Honda has launched its first natural gas-powered vehicle, the Honda Civic GX.
  • Manufacturing: The manufacturing sector is another area where gas usage could increase. The consulting group PwC (formerly called PriceWaterhouseCoopers) predicts that manufacturers will expand their energy-intensive operations in the years ahead and consume more natural gas. Increased demand in manufacturing would absorb more of the available gas supply and raise the prices that gas heat customers pay.
  • Reduced Production: U.S. gas producers have shut down some gas wells because prices are too low to justify their costs. Wholesale gas has been selling as low as one half the actual cost of production. By reducing the supply, they hope drive up the price that consumers pay.
The relatively low natural gas prices of 2013 benefitted heat customers, but prices are likely to increase as demand increases for natural gas for electricity generation, exports, transportation and manufacturing.

Return On Investment

After putting the time and money into a costly conversion to natural gas, customers can only expect to see a return on investment IF the natural gas price stays low, and with prices having more than doubled over the past year, that's a big "if." Plus, assuming natural gas prices do stay at their current level, it would still take 9-10 years for the customer to break even, whereas a consumer who upgrades to a new oil system instead can expect to see a return on investment within 3-5 years. To learn more about the benefits of upgrading, contact your local Oilheat dealer.

Gas Conversion Carries Hidden Costs

Often gas heat providers talk about "free" boiler offers. The truth is these offers are far from free. Converting to gas often involves hidden costs that can increase the total cost to over $12,000. The cost of converting to gas includes installing chimney lining, installing the new heating system (plus the cost of the system itself if no "free system" offer is available), and the removal of the oil storage tank. In addition, with a gas heating system, you have to worry about leaks, explosions, and carbon monoxide releases without any visible signs. To learn more about the hidden costs of conversion, visit the American Energy Coalition website or contact a local Oilheat dealer.

Natural Gas Offers Less for Customers

Homeowners sacrifice a lot when they switch from Oilheat to gas heat. Here is a look at some of the areas where natural gas comes up short by comparison.
  • Lack of competition: Gas utilities don't face serious competition, which means they don't have to worry about getting undercut on price. When natural gas utilities raise their fuel prices, customers have nowhere to turn for a better deal.
  • Poor service: Gas utilities don't have to worry about losing customers to other suppliers due to poor customer service, so their customer service is not up to Oilheat standards.
  • No service for heating equipment: Utilities do not repair heating equipment. If yours breaks in the middle of the night, you need to find an independent contractor to make a house call.
  • Vulnerability: When the gas utility has a service outage, you lose heat, because gas customers are completely dependent on continuous gas delivery. There is no option for independent storage on the homeowner's property, as there is with heating oil.
  • Safety: Natural gas is a volatile fuel that is delivered by a pressurized pipeline. A leak can fill a home with enough gas to cause a major explosion. Additional new demand from manufacturing and electric utilities means increased stress on aging distribution pipelines.

Natural Gas and the Environment

The natural gas industry makes lofty claims about cleanliness and low emissions, but the facts tell a different story.

Here is a look at the real environmental impact of natural gas.
  • Climate change: Natural gas is mostly methane, which is a greenhouse gas with up to 72 times the global warming potential of carbon dioxide. Gas leaks are so commonplace throughout the production and transmission process that the natural gas industry is responsible for 18 percent of all methane emissions worldwide, according to the Methane to Markets program.
  • Local leaks: Leaks from gas pipelines are so commonplace that the Gas Piping Technology Committee (GPTC) has developed guidelines for what it calls "leak management." "Gas leaks are a part of our business, and it is how you manage them that depends on whether you are making sound business decisions," a trainer advised operators in 2007. Estimates are that anywhere from 2% to 10% of the gas coming out of the well never reaches a consumers meter.
To learn more about how natural gas threatens our environment, visit http://americanenergycoalition.com.

Electric Deregulation in Pennsylvania Means Higher Bills

Deregulation of electricity rates in Pennsylvania has raised rates in many corners of the state since the beginning of 2010. Electric heat customers have been particularly hard hit due to the elimination of special discount rates for electric heat and electric hot water heaters.

Whether you've already been affected by these increases or are about to be, now is the time to do something about it. Oilheat dealers in the Commmonwealth can help you save on heat by converting your home to Oilheat and installing high-efficiency systems that can help lower your energy bills by up to 40 percent.

The U.S. Department of Energy estimated in its 2012 Heating Fuels Comparison Calculator that Oilheat customers spent 18.3 percent less on heat than electric heat customers did.

When it comes to electricity, Oilheat costs less. And according to a study by the Oilheat Manufacturers Association, converting from electric to Oilheat has the following benefits:

Improved comfort - air at the register of an Oilheated system is almost 30 degrees warmer than from a heat pump
Lower heating costs (up to $70,000 cost savings over 20 years)
50% reduction in greenhouse gas emissions by homes
90% reduction in ozone and particulate emissions
Excellent paybacks for homeowners often in only one to three years




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