Heat pumps vs. oil furnace heating: What’s better in 2025?

Heating our homes in the winter is essential for comfort and survival for millions of people around the world. In the U.S, some regions have extensive heating needs for half the year or more, while milder climates may only require supplemental heat during a few cold nights in January.

When choosing a home heating system, consider factors like the cost to install and maintain the system, operational limitations due to extreme outdoor temperatures, and how the new equipment may impact your home.

We’ll compare heat pump systems with oil-fired heating systems to help you decide which is best for you.

Heat pumps

Heat pumps are becoming a popular home heating and cooling solution. Based on shipment data from the Air-Conditioning, Heating, and Refrigeration Institute, American heat pump purchases outpaced gas furnace purchases by 32% in 2024, and outpaced oil furnaces by a whopping 13,624%.

Heat pumps use electric compressors to move heat from outside the home to an indoor heat exchanger. This may sound familiar because it’s also the same way modern air conditioning units work—just in reverse. One of the main benefits of installing heat pumps is that they can be used for both heating and cooling as needed throughout the year.

Heat pumps are significantly more efficient than other methods of heating and cooling. These systems are measured by a “coefficient of performance” (CoP), which essentially measures how efficiently a system uses energy to complete its task—in this case, heating or cooling a space. 

A value of one indicates 100% efficiency, where every watt of energy consumed is used to create a BTU (British Thermal Unit) of heating or cooling. However, heat pumps can have a coefficient of performance above one, and, in a best-case scenario, up to four (or 400% efficiency). A heat pump that consumes 4,000 watts of energy could produce nearly 16,000 BTUs of heating or cooling.

How is this possible? Heat pumps use energy to move heat from one place to another, instead of using energy to create heat. 

Heat pumps can be installed to retrofit existing ducted heating and cooling systems or can be installed with dedicated indoor heat exchangers mounted on the wall to warm the air in your home.

Oil heating

Many homes, particularly in the northeast U.S., use oil to heat their homes in the winter. Heating oil has been used since the 1800s and is most commonly found in areas that don’t have access to a natural gas connection, but still require substantial heating during the coldest times of year.

Heating oil can be used as fuel for boilers and furnaces. Oil boilers are usually more efficient and provide better air quality within a home since they typically use hydronic (water-filled) baseboards to distribute heat. 

However, oil boilers are also larger and more expensive to install, and generally take longer to heat up compared to oil furnaces. Oil boilers can also create a higher risk of property damage if you run out of oil or can’t run the heat for an extended period, allowing those water-filled pipes to freeze and burst. 

Oil furnaces are more common in the U.S., in part because they are easier and less expensive to install and provide heat faster than boilers—but they're also less efficient. And since heat is delivered to the home through hot air blown through ducts, some feel they provide lower air quality and comfort compared to oil boilers.

All oil-based heating systems require oil to be delivered throughout the heating season to a tank within your home. Most tanks are 275 gallons, but for safety reasons, they're usually limited to 240 gallons of oil. At an average outdoor temperature of 32°F with the heat in your home set to a comfortable temperature (around 72°F), an oil system will typically use about 6.5 gallons in 24 hours.

So if the average temperature outside is around 32°F during the winter, oil systems will need to be refilled about once a month.

Heat pumps and oil heating are proven methods for staying warm throughout the winter. But if your heating system needs an upgrade, which is right for your home? 

We can compare the two based on the cost to install and operate each system, plus maintenance needs during a typical year. We’ll use oil furnaces for this comparison, since they're more commonly installed and, like heat pumps, provide heat via forced-air delivery.

Heat pumps

According to 2023 data collected by EnergySage, heat pump systems typically cost between $7,120 and $36,000 to install, with an average cost of $16,025 after state and federal incentives. The price range is due to a number of factors, including where you live, the complexity and size of the system, and any other work that needs to be done.

Depending on how your home is set up, air-source heat pumps that use existing ducts may be less expensive overall because one outdoor unit is usually enough to heat a typical house. 

For homes without ducts, ductless mini-split systems can be cheaper to install per unit and can provide multiple zones of temperature control using independent indoor heat exchangers. The average cost per zone is $4,780, so larger homes that install three zones or more may see higher overall costs compared to those installing a single air-source system.

In some cases, particularly in older homes, electrical upgrades to breaker panels or meter connections may be necessary for heat pumps to function properly, which can increase installation costs.

Oil furnaces

Oil furnaces can cost between $6,400 and $9,200 to install, with an average cost of $7,400. A new oil furnace can usually be fitted to existing ducts within a home, but additional modifications may be required to allow the oil tank to be regularly refilled.

The verdict

You'll typically pay more to install a heat pump system than an oil heating system. But once installed, heat pumps are significantly more efficient than oil heat and don’t require regular refueling—more on that in the next section.

Unique aspects of your home could require additional work or materials to properly install heat pumps or oil heating, which could increase the price. It’s best to consult with an HVAC professional to get an estimate on installation costs for your unique situation.

Heat pumps

The cost to operate a heat pump system depends on how much electrical energy is needed to heat your home. Consumption depends on many factors, including what electricity costs in your region and what temperature you like to maintain inside your home.

Heat pumps become less efficient as the outdoor temperature drops. In ideal conditions, the average heat pump can produce up to 400% more heat energy than it consumes in electricity. That rate drops to around 250% at 32°F, and 100% or less at 0°F. Most modern heat pumps can still effectively heat your home at temperatures well below freezing, down to -15°F, but system efficiency won’t be optimal.

If you live in a region with average daily temperatures below freezing for more than a few days a year, the overall efficiency of a heat pump system in the winter could be as low as 200%—still better than oil furnaces' efficiency.

Oil furnaces

The cost to operate an oil furnace also depends on several factors, including the price of heating oil, the efficiency of your furnace, and the average outside temperature. Oil furnaces average about 85% efficiency, making them significantly less efficient than a heat pump. However, unlike heat pumps, the efficiency doesn’t change based on the outside temperature. Oil furnaces are located inside, away from the elements, and don’t function by pulling warmth from the air. 

Similar to a heat pump, lower temperatures mean your furnace will use more energy to maintain a warm interior. Homes that regularly see average temperatures below freezing will spend more on oil heating because they have to burn more. You can estimate oil furnace operating costs by multiplying the size of the tank in gallons by the average cost per gallon of an oil delivery. 

The verdict

The cost of heating your home with heat pumps or oil heat depends on several factors, including the price of electricity, the price of heating oil, the average outdoor temperature, and how warm you keep your home. Per unit of energy consumed, though, heat pumps will always be more efficient than oil heating, even in cold climates.

Both heat pumps and oil furnaces should be serviced annually by an HVAC technician. This will help identify potential issues before they impact your heating capabilities when you really need them.

Most heat pump systems and oil furnaces use replaceable air filters to improve air quality. These should be changed at least every six months, or as often as recommended by the manufacturer. If your heat pump is connected to mini-splits, those units also contain filters that should be cleaned or changed every six months.

Heat pumps

Oil furnaces

Both heat pumps and oil heating exist to keep you comfortable and warm all winter long. Heat pumps are growing in popularity because they're highly energy efficient, don’t need to be refueled multiple times in a winter season, and have been proven to work even in cold climates—they also have the added bonus of cooling your home in the summer months, in addition to heating it during the winter.

Oil heating systems are still common in parts of the U.S. and provide reliable heat for millions of homes, but are significantly less efficient and require scheduling semi-regular oil deliveries to keep your tank full. 

While oil heat may be less expensive to install initially, heat pumps' increased energy efficiency means they'll save most homeowners money over the life of the system. Some homeowners have chosen to install heat pumps but retain their oil heating systems as a backup for very cold nights. If it works in your unique situation, a combination of heat pump and oil heat could be the right solution, too.