Heating oil prices surge: what it means for Canadian homes
Furnace oil has jumped sharply since the Iran war began, according to Global News. Here is what that means for heating upgrades and your quotes.
If you heat with oil, this winter will cost more, and switching systems is worth pricing now. According to Global News, heating oil prices have climbed about 42 per cent in most of the country since the Iran war began, and the pain is expected to be sharpest in Atlantic Canada.
What happened
Global News, citing Natural Resources Canada, reports that the average retail price of furnace oil was just under $2.50 per litre last Tuesday. That compares with $1.76 just before the war and $1.56 in January.
A McMaster University supply chain professor told Global News the increase is directly tied to disruptions around the Strait of Hormuz. He also pointed to seasonal refinery shutdowns as extra pressure this year.
The report adds that the federal pause on the excise tax on fuel is to be extended until February. For Atlantic Canada, the same expert estimates that a single cold snap could add $600 to $700 per household, and that higher oil prices combined with the end of the tax holiday could add $3,000 to $4,000 to an energy bill.
On the policy side, Global News says the Prime Minister has announced a new federal heat pump rebate program for early next year, with $2 billion to retrofit one million homes. Details have not been finalized, and the existing oil-to-heat-pump program is being wound down.
What it means for your project costs
We can't forecast fuel prices, but we can show you what the alternatives cost to install. Our figures are before GST/HST and cover labour hours × local rates plus materials, checked against market prices and real quotes.
A ducted heat pump. A typical installation runs $12,000, with a usual range of $9,350 – $15,600. Which system you choose matters:
| Material | Typical | Usual range | Lifespan |
|---|---|---|---|
| Ductless multi-zone (whole home) | $10,900 | $8,450 – $14,100 | – |
| Ducted air-source heat pump | $12,000 | $9,350 – $15,600 | – |
| Dual-fuel hybrid (keeps gas furnace) | $13,000 | $10,100 – $16,900 | – |
A dual-fuel hybrid keeps your existing furnace as backup, which may suit homeowners worried about very cold snaps. Full details are in our Heat pump installation guide.
A new furnace. If you are not ready to leave oil, replacing the furnace is the other route. A typical job is $5,500 ($4,300 – $7,200). Options, including an oil furnace and an electric one, are compared here:
| Material | Typical | Usual range | Lifespan |
|---|---|---|---|
| Electric furnace | $5,000 | $3,900 – $6,550 | 20-30 years |
| Gas, 95-96% AFUE, single-stage | $5,500 | $4,300 – $7,200 | 15-20 years |
| Gas, 96% AFUE, two-stage, variable-speed blower | $6,850 | $5,350 – $8,900 | 15-20 years |
| Oil furnace, 85-87% AFUE | $7,050 | $5,500 – $9,150 | 15-20 years |
| Gas, 97-98% AFUE, modulating | $9,050 | $7,050 – $11,700 | 15-20 years |
See our Furnace replacement guide. Federal rules require new gas furnaces to be at least 95% AFUE, so an 80% unit is not an option for a normal home.
Cutting the load first. Using less fuel helps at any price. Windows typically cost $5,400 (Window replacement), and we cover wall and attic upgrades in other guides.
Grants: what we can confirm
- The federal Greener Homes Grant and Loan are closed.
- The federal Oil to Heat Pump Affordability program offers up to $10,000, or up to $25,000 when co-delivered with the province, for oil-heated homes. Applications closed on 31 July 2026 in Alberta, Manitoba, the Northwest Territories, Quebec and Saskatchewan.
- In Ontario, Home Renovation Savings offers up to $7,500 for a cold-climate air-source heat pump in homes heated by electricity, oil, propane or wood (up to $2,000 for gas-heated Enbridge customers). Pre-approval and a participating contractor are required.
Details of the new federal program are not final, so we won't guess at amounts or start dates. Check eligibility before signing a contract, because work started before approval may not qualify.
How to approach quotes
- Get at least three written quotes, with equipment model, size and what is included.
- Ask how the contractor sized the system for your coldest days and whether a backup is included.
- Confirm that electrical, gas and plumbing work is done by licensed trades with permits.
- Use our "is my quote fair" tool to compare each quote against the live figures above.
Contractors can get busy once the cold arrives, so booking sooner may give you more choice. If your oil tank is running low, a short-term fill and a spring installation can be a sensible compromise.