US Heating Costs More This Winter - Oil up 45%, Gas 19% From Last Year

October 7, 2002

WASHINGTON — U.S. consumers will pay 45 percent more this winter for heating oil and 19 percent more for natural gas to warm their homes due to rising crude oil prices and colder temperatures, the government said Monday.

With the U.S. economy already struggling, higher winter heating bills could not come at a worse time as the additional expenses may cut into consumer spending.

"Under normal weather assumptions, winter heating bills for residential consumers could average from $100 to $300 higher than last winter," the Energy Information Administration said in its winter outlook.

The cost of propane, used by some Midwestern homes for heating, is also expected to rise by 22 percent this winter, according to the EIA, the Energy Department's analytical arm.

Because last winter was the warmest on record and this year's is expected to be more normal and colder, heating fuel use this winter is expected to increase. The EIA forecast heating oil demand will be up 19 percent, natural gas use up 12 percent and propane demand up 1 percent.

The winter heating season runs from October through March.

"We're looking at higher prices, mainly driven by crude oil and higher demand, mainly driven by demand. The result is higher fuel bills," EIA Administrator Guy Caruso said at an annual conference to announce the winter outlook.

A weather outlook forecasting normal winter temperatures -- compared to last year's above-normal temperatures -- will account for "a substantial difference in demand," he added.

American consumers should brace for sharply higher winter heating bills, he said.

During the U.S. heating season, the average household is forecast to spend $934 on heating oil, compared to $643 last year. Natural gas costs will average $710 this winter compared to $596 last winter and propane costs for the season will jump to $1,082 from $887, EIA said.

CRUDE BOOSTS SOME PRICES

Because of stronger fuel demand, the average crude oil price is expected to stay above $30 a barrel through the winter because to strong petroleum demand, the EIA said.

"Tight oil markets have generated sharp increases in crude oil costs since last winter, and this situation is expected to last through the heating season," the agency said.

Global crude oil prices have marched higher in recent months on concerns of a possible U.S. military strike against Iraq. Such action would halt Iraq's oil exports, which average about 2 million barrels per day.

This winter, U.S. retail heating oil prices are projected to average $1.35 a gallon, up 25 cents from last winter.

Residential natural gas prices will average $7.75 per thousand cubic feet, up from $7.34 last year. Propane prices will average $1.20 a gallon this winter, up 10 cents.

U.S. heating fuel inventories are near normal or above normal levels, which should limit the risk of even higher prices should there be colder-than-normal weather, EIA said.

The amount of natural gas in storage at the beginning of the winter season was estimated to be 3.058 trillion cubic feet, up 114 billion cubic feet from last year and the highest in 11 years, EIA said.

Propane stocks at the beginning of the winter season are estimated to stand at 71.5 million barrels, 4.5 million barrels higher than last year and the highest level in 4 years.

Heating oil supplies, while not extremely low, are less plentiful than those of natural gas and propane. Beginning-of-season inventories are estimated at 130 million barrels, 3 million barrels more than the previous winter, but in the lower half of the five-year average.

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