Energy Cost Example #2
Natural gas costs 9.74/MCF.Heatingoilcosts0.99/gal. The natural gas furnace runs at 90% efficiency and the oil furnace runs at 80% efficiency. Which fuel is cheaper?
Ok. This 5.7 is an interesting problem here. We are trying to compare the prices of two fuels – Natural Gas which sells for 9.74/MCF,andwealsohaveoilthatsellsat0.99/gallon. We are trying to compare the prices of these two and choose which one is the best fuel or cheapest fuel. So we need to calculate the price per million BTUs so that we can compare these two fuels. And we also know the furnace efficiencies of each of these. Natural gas furnace efficiency is 0.9, and we know the oil furnace efficiency is 0.8; it is given. So we need to calculate the actual cost and compare the cost.
Natural gas actual cost will be cost per unit fuel, which is 9.74/MCFdividedbytheheatingvalueperunitfuel.Heatingvalueforthisonehappenstobe1.0MillionBTUsperMCF,andwehavetomultiplybytheefficiencyhereinthedenominatorwhichis0.9,sotheNaturalGaspriceturnsouttobe10.83 or $10.83 per Million BTUs (MMBTUs).
Natural Gas $9.74MCF0.9 efficiencyNatural Gas = $9.74MCF1.0 MMBTUMCF × 0.9 = $10.82MMBTUs
When you do similar calculation for oil here, the actual price is, per unit is 0.99pergallonhereandhowmanymillionBTUsdowegetpergallon?0.13MillionBTUs(0.13MMBTUs).Wehavedonethisbefore.Wehavetohavethesameunitshere.GallonsandgallonsandMCFandMCFhereinthiscase(naturalgas)andtimestheefficiencyis0.8.Sothepriceworksouttobe9.50 per Million BTUs. Same million BTUs would cost 10.82forNaturalGasandoilwouldbe9.50, so oil is cheaper.