Oil heating cheaper than mains gas

Jeremy Hawksley - welcome news for the industry and the 1.5 million UK households who use oil for heating

Jeremy Hawksley – welcome news for the industry and the 1.5 million UK households who use oil for heating

Oil is now the cheapest of all the major heating fuels, costing £119 less per year to heat an average three-bedroom home than mains gas, the second cheapest option.

According to the Sutherland Tables, a recognised independent source of data on comparative UK domestic heating prices, the price of kerosene has fallen by nearly 30% over the past two years and it is the first time the price has fallen lower than mains gas since 2010.

Cost comparisons and projections

Comparing the cost of heating the same average home with either LPG or electric storage heaters – the other main heating methods used by off gas grid households – and oil remains considerably cheaper, currently coming in at 47% less expensive than LPG and 37% cheaper than electricity.

Most analysts agree that the price of oil is set to stay low for the foreseeable future and this is supported by DECC’s most recent Fossil Fuel Price Projections Report which even forecasts the potential for further falls over the next three years.

Jeremy Hawksley, director general of OFTEC, said: “This is welcome news for the industry and the 1.5 million UK households who use oil for heating. With sustained low prices forecast, we envisage many households currently using LPG and electricity will look to switching to oil. We may even see some mains gas households changing to oil, particularly if they need to replace their boiler.”

Pie in the sky

The reduced price of oil is also expected to further dampen demand for the Government’s domestic RHI scheme. The Sutherland Tables show that the running cost of electricity driven Air Source Heat Pumps are significantly greater than those of a condensing oil boiler. Even after taking into account RHI payments, running costs are likely to remain considerably higher.

Ofgem’s Domestic Renewable Heat Incentive Quarterly Report published in November 2014 shows that in the first nine months of operation, the domestic RHI scheme has only attracted 2,402 new (non-legacy) accredited installations and, when launched, DECC’s initial impact assessment stated that the RHI aimed to support around 750,000 renewable heat installations by 2020. This equates to approximately 10,800 new installations per month so, with the current rate of take up, this target is clearly ‘pie in the sky.’

A more pragmatic approach

In light of this, OFTEC has again been calling for more pragmatic approaches to be taken to reduce heating costs and CO2 emissions. The trade body has written to all the major political parties proposing the introduction of a simple boiler scrappage and energy efficiency scheme which gives financial incentives to all oil and gas homes so they can upgrade to a condensing boiler and full home insulation.

www.oftec.org.uk

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