How To Budget For Heating Oil

It’s a sunny and hot day as I write this, and heating oil is probably the last thing on your mind. That being said, I wanted to plant a seed right now for what to expect for this upcoming heating season.

Since Russia’s invasion of Ukraine, we’ve seen record-high oil prices. In two years, we’ve seen prices rise from $1 to over $6 per gallon! Since there does not appear to be any relief in site, it’s time to think about a budget for this year.

Heating oil prices are mostly in the $5 to $6 a gallon range as of June, 2022. This is up from a low of about $1 a gallon in March of 2020.

How Much Heating Oil Will I Use In a Year?

We’ve written on this topic a few times and the answer is: it depends. Use the table below to estimate your annual heating oil usage. The bigger and older your house, the more oil you’ll use. The less-insulated your house, the more oil you’ll use. And if your hot water heater runs on oil, expect to use an extra 100 gallons or so throughout the summer months.

With that in mind, the average oil-heated home uses about 900 gallons of heating oil per year in a typical winter. To determine how much heating oil you will use, consider a Smart Oil Gauge to track your usage. Alternatively, gather your oil delivery tickets from the past two or three seasons and calculate an average.

The average oil-heated home uses just under 1000 gallons of heating oil per year.

How Much Should I Budget for Heating Oil?

Heating oil over the past several years has hovered around $2.50 a gallon. While it’s seen some dramatic swings (COVID-19 caused prices to drop precipitously when global travel halted), it was quite unusual to pay over $4 for oil in the past 10 years. At $2.50 per gallon, the average home that uses 900 gallons of heating oil would have spent $2,250 per year. Dividing this into the 5 months where the heat is really on (November through March), and it’s safe to budget $450 a month to get through the cold season.

As we head into heating season in 2022, we’re in for a huge change. If prices stay were they are right now, we’ll be paying approximately $5.36 per gallon this winter. As a result, the average homeowner would go from paying $2,250, to paying $4,824 – or more than double what they paid last year!

Instead of budgeting $450 a month from November to March, expect to budget $965 per month for the same period.

Heating oil prices have more than doubled in the past year.

Start Saving Now To Ease the Transition to Winter

One of the best ways to manage the rising prices of heating oil is to plan a full-year budget. While some oil companies offer to do this for you by putting you on a ‘Budget Plan’, you can do this yourself, while still getting the best price possible.

Begin by estimating your heating oil spend for this upcoming year (in this case, $4,824 for the average home in the northeast). Divide this by 10, for a monthly savings amount of $482. Starting in June, beginning saving this amount each month and you should confidently get through the upcoming heating oil season as today’s prices.

Divide your upcoming heating oil expense for this year by 10. Save this amount each month, beginning in June to prepare for heating season.

It’s never too early to start budgeting for this year’s upcoming heating season. While we don’t know where prices will be when the cold hits, we’re hopeful that they won’t get worse. If you start saving today and prices go down, you’ll be way ahead of the curve come January.

Happy summer,