The Heating War Erupts

In a bill-cutting battle, natural gas vs. oil

By now it is almost as mucha fixture of fall as football: the annual renewal of the struggle between the natural gas and oil industries to fuel America's furnaces. In a multimillion-dollar ad campaign, the American Gas Association has been seeking to persuade the 16 million owners of homes heated with oil that its product is the nation's "best energy buy" and "the most efficient way to heat." Fuel oil suppliers, for their part, say their competitors' contentions that gas burns more efficiently and will remain substantially cheaper represent "false claims" and "hype." Said ads sponsored by dealers in New England: "The more you know about gas, the more comfortable you feel about oil heat."

The gas industry, which now supplies 25% of the nation's energy needs, holds a commanding share of the heating market. It is estimated that gas has 55% of that market, down 1% in the past five years, while oil's slice has slipped from 23% to 20%. Electricity heats 17% of the nation's homes, with the remainder warmed by solar power, wood and propane gas. Last year 365,000 homes were converted to gas, mostly in the patch of Northern states stretching from Maine to Michigan, where oil usage is heavy; this year almost 400,000 homes are expected to switch. As much as 95% of the changeovers are conversions from oil.

The gasmen eagerly point out that, nationally, oil is now about twice as costly as gas (though the price differential can vary widely from area to area). In Philadelphia, for example, 1 million British thermal units of heat produced by gas cost $4.56, vs. $7.27 when oil is burned. For an average home consuming 121 million B.T.U.s per year, the annual bill for gas heat will be $552, compared with $880 for oil. But in New York City, gas is only 17% cheaper than oil.

In deciding whether to switch from oil to gas, owners must place the potential saving against the cost of conversion, which can be substantial. The cheapest way to change over certain types of oil furnaces or boilers in good working condition is to pay $800 for the instal lation of a gas burner. But often conversion means spending $1,200 for a new gas furnace or $1,900 for a gas boiler. Moreover, customers whose houses are far from streetside mains have to pay to have a gas line installed.

The gas industry argues that those who convert to gas can recoup their costs in one to five years and reap substantial savings thereafter.

But some experts contend that customers who reduce the flow of cold air into their homes with proper weather stripping and install new flame-retention oil burners, which cost about $400 and increase furnace efficiency by improving the air-fuel mixture, can save more money than by converting.

They also point out that it may not pay to install a gas burner to replace a new or fairly new oil furnace that has many years of useful life ahead of it.

Further complicating the gas-oil choice is the fact that gas is gradually losing some of its cost advantage. Spurred by the gas shortages of the winter of 1976-77, Congress in 1978 launched a program to boost supplies by phasing out price controls on new gas over a seven-year period ending in 1985. Gas prices could rise even faster if the Reagan Administration backs a new Department of Energy study recommending a speedup in the decontrol timetable to encourage wider exploration for new supplies. Moreover, Algeria, a major natural gas exporter, has been agitating for months to boost its natural gas prices to match those of OPEC oil. Of course, the cost of heating oil, which has risen by 105% since 1977, also continues to climb: this season the aver age cost of a gallon of fuel oil, now $1, may rise by as much as 10%, in part be cause of the danger of shortages caused by the Iran-Iraq war.

Fuel oil marketers dispute the contention of gasmen that imports and new production techniques will ensure adequate gas supplies through the year 2000; among other things, they point out, this assumes the continued willingness of foreign producers to supply the U.S., where foreign gas accounts for about 6% of the total. In addition, they raise questions about nonexistent technologies that will be needed to tap hard-to-get-at reserves. They insist that even if the Middle East shuts off the supply of Persian Gulf crude, domestic production would produce sufficient home-heating oil.

One thing that no one involved in the great heating debate disputes is that plain old conservation remains a highly efficient way to cut fuel bills. In an independent study, the Consumer Energy Council of America concludes that effective conservation measures can often yield financial returns for owners of oil-heated homes that are twice as great as those realized by conversion to gas.

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