Is heating oil cheaper than gas or a heat pump?

Compare the cost of a kWh of heat

Fuels are sold in different units, so the fair comparison is what you pay for each kilowatt hour (kWh) of heat that reaches your home. That depends on the price of the fuel's energy and how much of it your boiler or heat pump turns into heat.

• Heating oil: the government's 2026 conversion factors put burning oil (kerosene) at about 10.3 kWh per litre (gross calorific value).
• Boilers: the Energy Saving Trust says an A-rated gas or oil boiler should turn about 90% of its fuel into usable heat.
• Heat pumps: it says a heat pump gives three to four units of heat for every unit of electricity, an efficiency of 300 to 400%.

The figures for October to December 2026

Working out the heating oil figure

Each litre of kerosene holds about 10.3 kWh, and a 90% efficient boiler turns that into about 9.3 kWh of heat. So divide the price you pay per litre, including VAT, by 9.3 to get the pence per kWh of heat. Try it with today's typical 119.8p a litre, then with your own quote. An older, less efficient boiler makes oil heat dearer, and a cheaper quote makes it cheaper.

What the unit price leaves out

• Standing charges: the cap adds 29.68p a day for gas and 54.83p a day for electricity. Heating oil has no standing charge, but you buy it by the delivery rather than paying as you use it.
• Tariffs: the Energy Saving Trust says a heat pump will not necessarily be cheaper to run than a newer gas or oil boiler, but switching to a heat pump time-of-use tariff makes a saving more likely.
• Real-world efficiency: the installer must work out a seasonal figure (SPF) for your home, which is a better guide to running costs than the headline efficiency.
• Gas supply: gas is only an option if your home can be connected to the mains.
• Northern Ireland: the Ofgem cap does not apply, and VAT on household electricity there stays at 5%.

The cost of switching

The Energy Saving Trust puts a typical air source heat pump at around £12,000 to install, and a ground source one at around £15,000, or about £57,000 if a borehole is needed. In England and Wales the Boiler Upgrade Scheme gives £7,500 towards either, and until March 2027 an extra £1,500 if your home is heated by oil or LPG and has no mains gas connection. Scotland has its own Home Energy Scotland grant and loan. In Northern Ireland the Boiler Replacement Scheme has closed, and nidirect lists the energy saving grants available there. If you are staying with oil for now, today's average price is the number to plug into the sum above.