Heating Oil Up 42%: What It Means for Heat Pump and Furnace Costs
Furnace oil is reportedly about 42% dearer. Here's what that does to the case for a heat pump, a new furnace or a tighter house.
If you heat with oil, this winter will cost noticeably more, and the case for switching is stronger than it was a year ago. The upfront price of a replacement system hasn't moved because of this news. What has changed is how quickly the running-cost savings can add up.
What was reported
According to 604 Now, heating oil is now 42% more expensive across Canada. The outlet cites Natural Resources Canada figures: average retail furnace oil has gone from roughly $1.76 a litre before the Iran war began to about $2.50 a litre now. The report links the rise to war-related disruption of production and distribution.
The same report says the federal government has put a spotlight on home heating costs. Its press release notes that over seven million households still rely on oil, propane, diesel, electric baseboards or outdated furnaces. Ottawa says it wants to help one million households with retrofits, including up to 820,000 switching to electric heat pumps.
According to 604 Now, eligible homes could receive up to $10,000 through a National Heat Pump Rebate. It would be delivered through an online portal that is expected to open in early 2027. We have not seen programme rules beyond what the report describes, so treat the details as unconfirmed until the portal launches.
What it means for your costs
Pricing for the work itself is unchanged. We calculate it from labour hours × local rates plus materials, checked against market prices and real quotes. What a pricier fuel changes is the running-cost side of the comparison.
Oil furnace owners
A typical oil furnace replacement is about $7,050 before GST/HST. Replacing like for like keeps you tied to the fuel that just jumped in price. Our furnace replacement guide has the full breakdown: Furnace replacement.
Moving to a different fuel is a bigger job, because it can involve new venting, a gas connection or electrical upgrades. For comparison, a mid-efficiency gas furnace swap averages $5,500, and an electric furnace $5,000. Under federal rules, gas furnaces made since July 2019 must be at least 95% efficient, so an 80% gas unit is not an option for a normal house. Gas, electrical and plumbing work needs licensed trades and usually a permit.
Heat pumps
For a ducted air-source heat pump, our typical installed price is $12,000, within a usual range of $9,350 – $15,600. Those figures are before GST/HST. Your price depends on the system type:
- Ducted air-source heat pump: $12,000
- Dual-fuel hybrid that keeps a gas furnace as backup: $13,000
- Ductless multi-zone, whole home: $10,900
See the full comparison table for lifespans and ranges:
| 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 | – |
Our full cost guide is here: Heat pump installation.
Grants: what is confirmed and what is not
Only some of the support is in place today.
- Greener Homes Grant and Loan: closed. The grant documents deadline was 31 December 2025.
- Oil to Heat Pump Affordability (federal): up to $10,000 for oil-heated homes, or up to $25,000 where it is delivered together with the province. Applications closed on 31 July 2026 in Alberta, Manitoba, the Northwest Territories, Quebec and Saskatchewan. Check the programme page for your province's current status before you plan around it.
- Ontario Home Renovation Savings: up to $7,500 for a cold-climate air-source heat pump in homes heated by electricity, oil, propane or wood, or up to $2,000 for gas-heated Enbridge customers. Pre-approval and a participating contractor are required.
- National Heat Pump Rebate: announced, according to 604 Now, but not yet open. Don't count on it in a budget until the rules are published.
If you are on oil and your province's programme is open, apply before you sign anything. Pre-approval requirements mean a contract signed too early could cost you the grant.
Cheaper ways to cut oil use
Lowering demand also lowers the bill, whichever fuel you use.
- Windows: if yours are failing, replacement typically runs $5,400 for the default six-window job, with a usual range of $4,200 – $7,000. Ontario's programme pays $100 per opening with a home energy assessment. See Window replacement.
- Insulation: Ontario's programme covers up to $7,700. It's worth a home energy assessment first to see where the heat is escaping.
- Draught-proofing and servicing: a cheap first step while you wait for a bigger decision.
What we'd do now
- Get two or three quotes this autumn. Installers get busy once the cold arrives, and rising oil prices may add to demand.
- Ask for the heat pump and furnace options side by side. That shows what each costs to install and what it will likely cost to run.
- Check your province's programme before signing. Many require pre-approval.
- Don't wait for an unlaunched rebate if your heating is failing. A cold house in January costs more than any delay is worth.
- Run each quote through our "is my quote fair" tool. It compares line items against our live cost model.
GST/HST applies on top of renovation work (13% HST in Ontario, 5% GST in Alberta). All our figures exclude it.
We will update this piece when the National Heat Pump Rebate rules are published.