It could cost US consumers $190-240 more to heat their homes this winter than a year ago, the US Energy Information Administration predicts.
That's assuming normal winter weather, EIA said in its short-term energy outlook for October. An unusually cold winter would push that cost estimate higher; conversely, another warm winter like last year's would trim that projection.
EIA officials are estimating a normal level of heating degree-days this winter, about 11% more than last winter. As a result, they said, total electricity demand should increase by 2.8% overall, driven by increases of 4.6% in the residential and 3.9% in the commercial sectors.
Higher costs seen
EIA said the main reasons for the potential increase are:
- Higher demand for space-heating fuels than last winter, which was the warmest on record in the US.
- Inventories of key heating fuels-especially heating oil-are already below normal levels for this time of year and substantially below those at the start of last winter.
- Because of market conditions, crude oil and natural gas prices are near record highs.
Prices for benchmark light, sweet US crudes rose to a monthly average of $33.88/bbl last month from an average $23.80/bbl a year ago, triggering higher prices for refined products. Despite some easing of crude prices since late September, fuel prices this winter are expected to remain well above year-ago levels, EIA officials said.
The EIA reported that estimated retail heating oil prices averaged $1.34/gal last month, up about 44¢ from a year ago. Normal winter weather and gradually declining crude prices might limit additional increases through the winter peak to as little as 5¢/gal, officials said.
Base case conditions would yield an average winter retail price of $1.37/gal, up from $1.18/gal last year, officials predicted.
They estimated that spot gas prices averaged about $4.96/Mcf last month. That's nearly double the average price of a year ago, and that gap likely will widen by yearend, officials said. They estimated the amount of gas in working storage to be about 9% below normal and 12% below year-ago levels. In the event of a very cold winter, current fuel supplies could be strained in trying to meet higher demand, resulting in still further more price spikes, EIA warned.
The Clinton administration recently agreed to release some 30 million bbl of emergency crude supplies from the Strategic Petroleum Reserve in a move to reduce prices for oil and heating oil before the November election (see related stories, p. 46). That resulted in a knee-jerk reaction in the energy futures market that has somewhat shaved global prices for oil and refined products.
However, industry analysts say the extra crude will have little effect on heating oil supplies this winter, because US refineries have been running at virtually full capacity all summer. Additional imports of heating oil are unlikely to have much effect.
On the other hand, a colder winter that triggers a severe freeze along the Gulf Coast could disrupt domestic refining, pipeline, and field production facilities, curtailing even gas production.
Increases in gas production this year have failed to keep pace with increased demand, although the rates of injection into storage improved somewhat last month, EIA officials reported.