Oil-Fired Power

Oil used to be a mainstream power station fuel. In 1973 it supplied about a quarter of the world’s electricity (IEA). By 2025 its share had fallen to about 2.6%, roughly 840 TWh (Ember/OWID). It survives in niches where its old advantages still count: energy density, easy storage and transport, and engines you can install almost anywhere. Think of island grids, remote mines and villages, backup generation, emergency peaking, and a handful of oil-rich countries that burn crude and fuel oil in summer. Almost everywhere else, burning oil is the most expensive way to make electricity at scale.

How it works

Oil reaches the grid by three main routes.

Reciprocating engines (diesel gensets). A compression-ignition engine drives an alternator. Sizes range from portable 5 kW units to power stations built from 10–20 MW medium-speed engines that burn diesel (gasoil), heavy fuel oil or, increasingly, dual-fuel mixes with natural gas. Large engines reach 42–48% electrical efficiency. Small gensets run at 30–40% at full load and much worse at part load.

Oil-fired steam plants. A boiler burns heavy fuel oil or crude and raises steam for a Rankine cycle, much like a coal plant. Many were built in the 1960s and early 1970s, when fuel oil was cheap. They typically run at 33–38% efficiency. Big fleets are still in service in Saudi Arabia, Kuwait, Iraq, Iran and Japan. Some, in Japan for example, are held mainly in reserve.

Combustion turbines on liquid fuel. Gas turbines can burn diesel or light crude, either as their main fuel where gas is unavailable or as backup fuel when gas supply is interrupted. Open-cycle efficiency is roughly 30–40%, and combined-cycle plants on oil can approach 50%.

Both cost and emissions follow from the specific fuel consumption (SFC):

Diesel has a lower heating value of about 43 MJ/kg, or about 36 MJ per litre. Heavy fuel oil is around 40 MJ/kg, and crude oil roughly 42 MJ/kg. The fuel energy content calculator converts between litres, barrels, tonnes and kWh of oil products and compares them with gas and coal.

Main variants

The emission factors behind these numbers come from IPCC 2006 defaults: about 74.1 kg CO₂/GJ for gasoil/diesel, 77.4 for residual fuel oil and 73.3 for crude oil. That puts oil between natural gas (about 56) and coal (95–101).

Heavy fuel oil

Heavy fuel oil is what is left at the bottom of the refinery. It is viscous, must be heated to about 100–150 °C to pump and atomise, and is cheaper per GJ than distillates. It typically carries 1–3.5% sulfur plus vanadium, nickel and ash. Without flue-gas desulfurisation and particulate controls, HFO plants are among the most polluting generators per kWh. The 2020 IMO sulfur cap on shipping fuel (0.5%) cut demand for high-sulfur fuel oil in shipping and pushed some of it toward power plants in the Middle East and South Asia.

Where oil-fired power still runs

Island and isolated grids. Islands without gas pipelines or hydro often depend almost entirely on imported diesel and fuel oil. Examples include much of the Caribbean, Pacific island states, the Canary and Balearic islands (partly), Cyprus, and remote Arctic, Australian and Alaskan communities. Hawaii still generates a majority of its electricity from petroleum (EIA), giving it the highest power prices of any US state. Utilities there have every reason to adopt solar power, battery storage and wind. Each kWh of solar replaces fuel costing $0.20–0.40, so even a modest solar-plus-storage system pays for itself quickly. The solar battery calculator can model this kind of hybrid.

The Middle East. Saudi Arabia, Iraq, Kuwait and Iran burn crude oil, fuel oil and diesel for power, with a strong summer peak driven by air conditioning. JODI data show Saudi direct crude burn rising by several hundred thousand barrels per day between spring and the July–August peak in most recent years. Every barrel burned at home is a barrel not sold abroad at world prices, an expensive trade-off. Saudi Arabia’s plans to shift toward gas and renewables for about half of generation each by 2030 are largely about freeing crude for export.

Peaking and emergency backup. Oil-fired turbines and steam units in the US Northeast, Japan and parts of Europe run only during extreme cold snaps or supply crises. In New England’s winter peaks, oil can briefly supply a large share of output when pipeline gas goes to heating. After the 2011 Fukushima accident, Japan sharply increased oil-fired generation to replace shut reactors, at great cost to its trade balance. Hospitals, data centres and telecom sites keep a huge fleet of diesel backup generators that rarely run.

Fragile grids. In parts of Nigeria, Lebanon, Iraq, Pakistan and elsewhere, unreliable grids have led households and businesses to install millions of small diesel and petrol generators. In some countries their combined capacity rivals the national grid, and their exhaust makes already bad urban air worse.

Efficiency and capacity factor

Most oil-fired capacity hardly runs. US petroleum-fired steam turbines and combustion turbines typically post capacity factors in the low single digits to around 10% (EIA). Owners keep them for reliability, not for the energy. Island engine plants are the exception and run around the clock, often at 40–70% utilisation. Small gensets lose much of their efficiency at low load, a common situation in hybrid systems where solar covers midday demand. Fuel consumption per kWh at 25% load can be 30–60% higher than at full load. The capacity factor calculator shows how few full-load hours peaking plants accumulate.

Costs

Mainstream LCOE studies (Lazard, IEA/NEA, NREL ATB) generally no longer model new oil-fired utility plants, because almost no one builds them. Fuel drives the cost:

• At a crude price of $80/bbl, the fuel itself costs about $13–14/GJ. In a 35%-efficient steam plant that is roughly $135–145/MWh for fuel alone.
• Delivered diesel at $0.80–1.30 per litre in a genset using 0.27 L/kWh costs $0.22–0.35/kWh for fuel. Remote islands and mines add shipping, storage and handling.
• IRENA and World Bank island studies routinely report diesel generation costs of $0.25–0.50/kWh or more, against utility-scale solar LCOE now often below $0.05/kWh.

Capital is cheap, roughly $500–1,000/kW for engine plants, so oil gensets remain the lowest-cost option for capacity that runs only a few hours a year. Compare a high-fuel-cost, low-capex plant with solar or wind in the LCOE calculator.

Why oil’s share collapsed

The 1973–74 and 1979–80 oil shocks multiplied crude prices roughly tenfold within a decade. OECD governments answered with policy. The IEA, founded in 1974, pushed fuel diversification. The US Powerplant and Industrial Fuel Use Act of 1978 restricted oil and gas use in new power plants, and France, Japan and others launched large nuclear programmes. Utilities switched to coal, nuclear and later natural gas. Oil was worth more in transport and petrochemicals, where it was hard to replace, so power generation was the first use to go.

Land, water and materials

Oil-fired plants take up little space. Engine plants need little cooling water, often using radiators. Steam plants have water needs similar to coal per MWh. The wider footprint lies upstream in oil extraction, refining and tanker transport, and in the risk of spills. Long fuel supply chains to remote sites cost money and add risk: islands can run short when storms delay tankers.

Lifecycle CO2 emissions

IPCC AR5 WGIII Annex III does not report a separate oil category. The IPCC SRREN (2011) literature review gives oil-fired generation lifecycle emissions of roughly 510–1,170 gCO2e/kWh, with a median of about 840. That is close to coal and well above gas combined cycle (about 490 g median). Upstream emissions from extraction, flaring and refining add perhaps 10–25% to combustion emissions, and more for heavy or flared crudes.

Safety and health impacts

Oil combustion, especially of high-sulfur HFO and crude, emits SO₂, NOx, particulates and heavy metals. Our World in Data’s synthesis, building on Markandya & Wilkinson (Lancet, 2007), puts oil at about 18.4 deaths per TWh, second only to coal (24.6) and far above gas (2.8) and nuclear, wind or solar (about 0.03–0.04). Small, unfiltered gensets in dense cities create high local exposure to diesel exhaust, which the WHO classifies as a Group 1 carcinogen.

Outlook

Expect oil’s share of electricity to keep falling. Island utilities are installing solar-plus-storage hybrids that cut diesel use by 50–90%. Gulf states are building large gas, solar and nuclear capacity, as with the UAE’s Barakah plant. Countries with fragile grids are seeing rapid growth in rooftop and mini-grid solar, from Pakistan to sub-Saharan Africa. It will probably hang on longest as emergency backup and in the most remote sites, possibly displaced over time by green hydrogen derivatives or renewable diesel. The world energy map shows which countries still rely on oil for power, and technology comparison puts its costs and emissions next to the alternatives.