New England gas utilities target oil-heated homes

March 30, 2000
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BOSTON, MA — Heating contractors in the Northeast are finding a niche market: the conversion of New England’s oil-heated homes to gas, a trend that has been going on for decades.

The trend is now intensifying, however, because gas utilities are using the dramatic oil price increases as a marketing ploy to increase their market share.

Usually the switch doesn’t involve a new furnace or boiler. A conversion burner, priced at less than $400, does the trick.

Customers with oil-heated homes, shocked at their February bills, are the prime targets for the promotion, says Tom Kiley, president of the New England Gas Association. He says heating oil is selling for $1.80/gal, compared to $1.13 for an equivalent amount of gas.

“That’s a strong selling point,” he says, claiming that the number of conversions to oil heating has more than doubled compared to last year for the first quarter. Where gas pipelines are available, the switch to oil is quick, needing only those conversion burners. However, he concedes that despite the price hike, oil has been generally less expensive than gas.

He estimates that in Mass-achusetts alone, oil’s share of the home heating market is down to 45% from more than 50% a decade ago.

Oil fights back

Oil retailers are fighting back, says Michael Ferrante, president of the Mass Oilheat Council, which represents 300 retail and wholesale oil distributors.

The group is running a lot of radio ads urging customers to stick with oil, which, despite the first-quarter price spike, is better in the long run than gas.

“The gas utilities did the same attack on oil in 1989, the last year we had a price spike that put the price at $1.56 — which, adjusted for inflation, is like what happened in the last two months,” he says.

Don’t expect oil retailers, who service and replace heating systems, to get into the conversion business, he adds. Getting a one-time payout would be done at the cost of eliminating their long-term cash flow for the oil commodity.

“There are contractors out there who would do the conversions, but our guys are committed to oil,” he says.

Both Kiley and Ferrante acknowledge that the years-long erosion of oil has been a marketing challenge for both fuels.

In 1997, the last year measured, 92,000 American homes converted from oil to gas, of which 31% were from fuel oil, according to the American Gas Association.

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