Natural gas is the cheapest heat source for most American homes, costing roughly $8 to $10 per million BTUs of delivered heat. That’s less than half the cost of propane, a third the cost of electric resistance heating, and competitive with all but the cheapest firewood. But “cheapest” depends on more than fuel price alone. Your climate, the equipment you already have, and what you’re willing to invest upfront all shift the answer.
Fuel Costs Compared Side by Side
The fairest way to compare heating fuels is cost per million BTUs of usable heat, which accounts for how much energy each fuel contains and how much of that energy your equipment actually delivers to your rooms. Using data from Oklahoma State University Extension, here’s how common fuels stack up at typical prices:
- Natural gas: ~$8.24 per million BTUs (at $0.70 per therm, 85% efficient furnace)
- Hardwood firewood: ~$13.89 per million BTUs (at $200 per cord, 60% efficient stove)
- Wood pellets: ~$15.20 per million BTUs (at $200 per ton, 80% efficient stove)
- Heating oil (#2 fuel oil): ~$19.73 per million BTUs (at $2.20 per gallon, 80% efficient)
- Propane: ~$23.12 per million BTUs (at $1.80 per gallon, 85% efficient)
- Electric resistance (baseboard or space heater): ~$32.24 per million BTUs (at $0.11 per kWh, 100% efficient)
These numbers shift with local prices, but the ranking stays fairly consistent across most of the country. Natural gas holds a commanding lead wherever it’s available. Electric resistance heat, despite being 100% efficient at converting electricity into warmth, costs the most because electricity itself is expensive per unit of energy.
Why Heat Pumps Change the Math
A heat pump doesn’t generate heat. It moves it from outdoor air into your home, which means it can deliver two to three times more heating energy than the electricity it consumes. That multiplier, called the coefficient of performance (COP), transforms electricity from the most expensive heating fuel into one of the cheapest.
A standard air-source heat pump operating at a seasonal COP of about 2.4 (the federal minimum efficiency standard) effectively cuts the cost of electric heat by more than half. At the current national average electricity price of around 17 cents per kWh, that brings the effective cost down to roughly $16 to $18 per million BTUs. A high-efficiency or cold-climate model with a seasonal COP of 2.8 or higher pushes that figure closer to $13 or $14, putting it in the same range as firewood.
In mild climates where temperatures rarely drop below freezing, heat pumps perform even better, sometimes reaching a COP of 3.5 or more. In those areas, a heat pump can rival natural gas on operating cost alone. The catch is cold weather: as outdoor temperatures drop toward 5°F, heat pump capacity and efficiency both decline. Cold-climate models are engineered to handle this better, but they cost more upfront.
The Role of Equipment and Installation Costs
Fuel cost per BTU only tells part of the story. What you pay to install and maintain the equipment matters over the life of the system.
A gas furnace typically costs $3,800 to $10,000 installed, depending on efficiency and ductwork needs. A ducted air-source heat pump runs $4,500 to $8,000. The overlap is significant, but high-efficiency heat pumps tend to land at the upper end of their range, especially cold-climate models. If your home already has ductwork and a gas line, replacing a furnace with another furnace is usually the cheapest upfront option. If you’re starting from scratch or replacing an aging system, a heat pump becomes more competitive.
Lifespan matters too. Heat pumps and central air conditioners typically last about 10 years before performance degrades enough to warrant replacement. Furnaces and boilers tend to last 15 years or more. That five-year difference means you’ll likely buy an extra heat pump over a 30-year period compared to gas furnaces, adding several thousand dollars in lifetime costs.
Federal Tax Credits Can Shift the Balance
The federal Energy Efficient Home Improvement Credit covers 30% of the cost of qualifying heat pumps, up to $2,000 per year. High-efficiency gas furnaces and boilers also qualify, but the cap is $600 per item. These credits apply to improvements made to your primary residence through the end of 2032, and you can claim them in the year the equipment is installed.
That $2,000 heat pump credit narrows the gap considerably. A $7,000 heat pump installation effectively becomes $5,000, bringing it in line with a mid-range gas furnace. Some states offer additional rebates through the federal Home Energy Rebates Program, which can stack with the tax credit for income-qualifying households.
Wood Heat: Cheap Fuel, More Work
Firewood is one of the least expensive fuels on a per-BTU basis, but its true cost depends heavily on where you live and how you value your time. Dense hardwoods like oak contain roughly 24 to 30 million BTUs per cord. At $150 per cord, that works out to around $8 to $14 per million BTUs of delivered heat, competitive with natural gas. At $250 per cord (common in urban areas), the advantage shrinks considerably.
Wood pellets offer a more convenient alternative. A ton of pellets contains about 16.5 million BTUs and burns in an automated stove at around 80% efficiency. At $200 per ton, pellets cost about $15.20 per million BTUs. At $250 per ton, that jumps to $19. Pellet stoves require electricity to run their feed mechanisms and fans, adding a small ongoing cost.
Both options carry trade-offs that don’t show up in fuel-cost calculations. Wood stoves need regular cleaning and chimney maintenance. You need covered, dry storage space. Hauling, splitting, and loading firewood is physical labor. And wood heat works best as a supplement or a primary source in smaller homes, not as whole-house heating in a large, modern layout.
Electric Resistance: Cheap to Install, Expensive to Run
Electric baseboard heaters and portable space heaters cost very little upfront. A baseboard unit might run $50 to $200 installed per room, and plug-in space heaters cost $30 to $100. That makes them tempting for renters or people heating a single room. But a watt is a watt with resistance heat. Whether it’s a baseboard, a ceramic tower, or an infrared panel, they all convert electricity to heat at essentially the same rate. No resistance heater is meaningfully more efficient than another.
At the projected 2025 national average of 17.3 cents per kWh, running a 1,500-watt space heater for eight hours costs about $2.08 per day, or roughly $62 per month. For a single room in a mild climate, that’s manageable. For a whole house in a cold winter, electric resistance heat can easily produce monthly bills of $300 to $500 or more. A small ductless mini-split heat pump serving the same space would cost about a third as much to operate.
What’s Cheapest for Your Situation
If your home has a natural gas connection, a gas furnace remains the cheapest option for most households when you combine low fuel costs, moderate equipment prices, and long equipment life. A 95% AFUE condensing furnace hits the sweet spot between efficiency and affordability.
If you don’t have natural gas access, a heat pump is almost certainly your best bet. In mild and moderate climates (most of the South, Mid-Atlantic, and Pacific Coast), a heat pump will cost less to operate than propane, oil, or electric resistance heat. In cold climates, a cold-climate heat pump paired with a backup system for the coldest days offers the best balance of comfort and cost.
If you have access to cheap firewood and don’t mind the labor, a modern EPA-certified wood stove can heat a home for very little money, especially as a supplement that reduces your primary heating load. For a single room or occasional use, a small ductless mini-split heat pump beats every type of electric resistance heater by a wide margin on operating cost, even though it costs more to install.
Energy prices also matter at the local level. Electricity in the Pacific Northwest averages around 10 to 11 cents per kWh, making heat pumps exceptionally cheap to run there. In the Northeast, where electricity often exceeds 20 cents per kWh, the calculation favors gas or oil more heavily. Checking your own utility rates against these benchmarks gives you a much clearer picture than any national average can.