This tracks with anecdotal evidence from contractors — mainly in the Northeast U.S. — who claim they have been converting oil equipment to natural gas at a record pace. But that doesn’t mean oil furnaces will fade from the marketplace any time soon, as there are many areas in the country that have limited access to natural gas. In addition, it can be expensive to convert to another fuel, and new technologies and cleaner burning fuels (see sidebar below) mean that oil furnaces can provide better comfort and higher efficiencies than units manufactured just a few years ago.
Opting For Stability
The price of heating oil has been extremely volatile, which is why many homeowners are moving to heat pumps or natural gas furnaces, if they can. Consider that the U.S. Energy Information Administration (EIA) projects average household expenditures for heating oil to increase by 19 percent this winter (October 1 through March 31) compared with last winter, and it’s easy to see why customers may want more stability in their fuel bills. Indeed, EIA noted that average expenditures for households that heat with heating oil are forecast to be higher than any previous winter on record.
That’s why much of the sales decrease in oil furnaces can be directly attributed to the unpredictable price of oil, said Dave Garvin, product manager, Nordyne. “We see many of the oil furnaces being replaced by heat pumps. Even though electric rates may go up, they are generally more stable than oil prices. What we need is a stable supply of oil to help keep prices flat, and then oil furnace sales may also level out.”
While the increased price of heating oil has definitely had a major impact on shipments of oil furnaces in 2012, noted Terry Stern, product manager, residential heating, IAQ, and controls, Rheem, the poor economy has also taken its toll. “Homeowners feel insecure about their jobs, so more people are opting to fix their furnaces instead of replacing them. Plus, homeowners with ductwork have a number of options to consider when evaluating heating equipment, including heat pumps, natural gas furnaces, boilers with hydronic coils, and even integrated heating and water heating systems that use tankless water heaters to heat both the air and the water in a home.”
The economy has contributed to the decline in oil furnace demand, but a growing environmental sensibility is also affecting sales, said Jim Lowell, product manager, furnaces, Residential Solutions, Ingersoll Rand. “Oil furnaces typically cost more to purchase, install, and operate than natural gas furnaces, and the environmental impact of natural gas is significantly less than fuel oil. Given the uncertainties in the world oil markets, domestic natural gas will probably continue to be the more economical alternative.”
Paul Quigley, vice president, sales and marketing, Bard Mfg. Co., noted that while its marketshare of oil furnaces has actually increased, the company is paying close attention to the ongoing decline in overall oil heating sales. “Barring a significant price increase from the gas and electric utilities, we are of the opinion that the decline in demand for oil heating appliances will continue. The Northeast region, as well as the northern Midwest and Plains states remain the strongest oil furnace market. Almost all of our oil furnaces are being utilized in residential retrofit and system upgrade applications.”
Even though sales of oil furnaces may be declining, some manufacturers are rolling out new and improved models that may tempt homeowners to replace, rather than repair. This fall, Bard is releasing an improved version of one of its most popular units.
“Through improvements in burner and blower technology, accompanied by other engineered enhancements, we are introducing an option for an 85-percent efficient oil burning furnace,” said Quigley. “In addition, we are now offering a unique hybrid system that allows a homeowner to combine the efficiencies of our geothermal heat pump with the warm reliability of our oil burning furnace.”
Rheem recently launched its ROCB line of oil furnaces, which features a two-stage burner with a 50 percent turndown ratio, said Stern. “The line has documented fuel savings of 15 to 20 percent, compared to units with a single-stage burner. And, the ROCB-072-M is the only furnace that has the option of a front and rear flue on the same unit. This unit is available in both single-stage (86 percent AFUE) and two-stage (87.7 percent AFUE) formats.”
Garvin noted that oil furnaces will benefit most from the addition of variable-speed blowers.
“We expect the market for these furnaces to continue to grow because of the quiet operation and home comfort features.” That being said, there are fewer products coming on the market, as only a handful of oil furnace manufacturers exist today, he said. “Sales are a drop in the bucket compared to ubiquitous gas furnaces.”
“We do believe that some manufacturers will either exit the market completely, or turn to outsourcing production to offer under their brand name(s), as some have already done,” said Dick Hanna, director of product development, Bard Mfg. Co.
Quigley added that the number of manufacturers willing to participate in this decreasing market continues to decline, because “the simple fact is that gas and electric utilities have been economically added to remote regions where they were not available in the past, which has led to a significant drop in demand for oil heating appliances.”
Given the more stable prices of natural gas and electricity, it seems inevitable that customers will continue to move away from oil equipment when they can. However, customers should rest assured that manufacturers will still be around for those who choose to remain loyal to oil. “We do our best to support all of our customers, including oil furnace customers,” said Lowell. “As long as we are able to meet customer needs and support our business strategy, we will continue to do so.”
Sidebar: Bioheat Heats Up Market
A renewable resource that is gaining notice in the oil market is Bioheat, which is a domestically produced heating oil that is blended with animal or plant oils in order to burn more cleanly, thus reducing emissions. According to testing conducted by the National Oilheat Research Alliance (NORA), some Bioheat blends can reduce sulfur oxide emissions by as much as 80 percent, nitrogen oxide emissions by 20 percent, and carbon dioxide emissions by 20 percent.
While most existing oil furnaces can use Bioheat without major modifications, homeowners that employ biofuel-blended oil need to work closely with their contractor to ensure proper maintenance, said Terry Stern, product manager, residential heating, IAQ, and controls, Rheem. “That’s because biofuel can sometimes act as a cleaning agent and — in certain instances — homeowners may experience clogging in their unit’s filters. This most often occurs on older untreated systems and is not a widespread service issue. To help minimize this potential issue, homeowners that switch to biofuel-blended oil will need to change filters as required during the early stages of the conversion process.”
New York City recently became the first city in the country to mandate that all home heating oil be a Bioheat blend. While no other city has a Bioheat requirement in place, several states have passed requirements that will go into effect when contingent states pass similar laws, noted Farm Futures magazine. The new mandate in New York City is expected to replace 20 million gallons of petroleum annually.
Publication date: 11/26/2012