In principle, all central heating systems work the same, whether they are fueled by oil, gas, propane, or electricity. They have three basic components that work together to keep your home warm: The furnace or boiler which serves as a heat source. The ductwork or radiator which circulates the heat around the house. A thermostat that turns the system on/off and controls the temperature. An oil heat system includes a tank (your oil supply is stored locally in a tank) and sometimes a separate water heater.