Winter bills set to spike 38% for heating-oil consumers
You may be spending hundreds of dollars more this winter to heat your home as colder weather boosts demand for heating fuels, including natural gas and heating oil, which have already seen spectacular price gains year to date.
The Energy Information Administration on Thursday forecast that consumers will see a 22% climb, or an average of $116, in their natural-gas heating bills this winter, which runs from October to March, compared to last winter. Consumption is expected to be about 10% higher.
Still, the EIA pointed out that the average spending for households heating with natural gas will be “comparable” to those in the five winters prior to last winter, which was particularly warmer than normal in parts of the country. It’s that big year-over-year change that could shock consumers reading this winter’s bill.
The EIA’s weather models from the National Oceanic and Atmospheric Administration show some improvements in winter weather in the high-population eastern half of the nation, more aligned with the 2014-2015 winter season.
“Last winter was so weak, similar to the 2011-2012 winter, [that] it’s easy to look better [meaning higher prices in the energy markets] on a year-over-year basis. Their weather models from NOAA point to enough of an improvement that all heating fuels are going to get a boost, beyond natgas,” said Richard Hastings, macro strategist at Seaport Global Securities.
About half of all U.S. households use natural gas, electric heating is more prevalent in the South and heating oil is used more often in the Northeast than in other regions.
Residential prices for natural gas are expected to average $10.37 per thousand cubic feet ($10.05 million British thermal units), which would be 11% higher than last winter and the highest since the winter of 2010-2011, the EIA said in its Winter Fuels Outlook report.
The EIA’s October Short-Term Energy Outlook report forecast spot prices for the fuel to average $2.51 per million Btus this year, up 3.7% from the previous forecast of $2.42. For next year, it sees an average of $3.07, up 7.1% from the last month’s forecast.
Futures prices for natural gas NGX16, -1.31% have already climbed by roughly 40% so far this year. They settled Thursday at their highest level in about 22 months after a report from the government revealed a smaller-than-expected weekly climb in natural-gas supplies.
Households heating homes with heating oil can expect to spend 38%, or $378, more on their heating bills than last winter, with retail prices at 42 cents a gallon, or 20% higher, according to the EIA. Consumption of heating oil is seen up 15%.
Heating-oil futures HOX6, -0.94% have gained nearly 19% year to date.
Of course, the projected heating cost increases all depend on the weather, and where you live.
Edward Vallee, a meteorologist at AccuWeather, said that for the rest of October, “much warmer-than-normal temperatures can be expected for a large portion of the U.S., with record warmth possible this upcoming week across the Plains and Midwest.
So, “heating demand looks quite low for many to start the heating season,” he said, adding that November looks to start warm, but could finish colder.
Will it last? Vallee provided a map showing just hold much colder or warmer certain parts of the country will be in December through February, compared to what’s considered a normal winter.
“Overall, energy demand is expected to be much higher than last year across the northern tier of the U.S.,” he said. “Also, demand is expected to be above normal across the Plains and Midwest, and near normal across the Northeast.”