The expected return to normal cold will likely drive up home heating costs for all major home heating fuels across the U.S. this upcoming winter, the Energy Information Administration said its latest "Short-Term Energy Outlook" released Oct. 11.
In a Winter Fuels Outlook supplement to the monthly report, the EIA said natural gas expenditures should rise by 12%, home heating oil by 17%, electricity by 8% and propane by 18%.
"Most of the increase reflects expected colder weather rather than higher energy costs," the agency said. "A warmer-than-forecast winter would see lower increases in expenditures, and a colder-than-forecast winter would see higher increases in expenditures."
Based on the most recent forecast of heating degree days from the National Oceanic and Atmospheric Administration, the weather this winter is expected to be colder than last winter across the country. However, last winter was significantly warmer than normal. On average, temperatures across the U.S. are expected to be 13% colder than last winter, with forecasts ranging from 27% colder than last winter in the South region to 4% colder than last winter in the West.
The EIA expects households heating primarily with natural gas will spend $69, or 12%, more this winter compared with last winter, driven by a 9% increase in consumption and a 2% increase in price. Residential natural gas prices are forecast to average $10.36/Mcf and average consumption is forecast to total 62 Mcf per household. Heating degree days this winter are expected to be 13% higher year on year.
Nearly half of all U.S. households heat primarily with natural gas.
Henry Hub spot prices are expected to average $3.18/MMBtu this winter, up 5% from last winter, which reflects higher usage across all consuming sectors and increased gas exports.
The EIA expects households heating primarily with heating oil will spend an average of $215, or 17%, more this winter than last winter, reflecting retail prices that are 25 cents/gallon, or 10%, higher and consumption that is 6% higher than last winter. Despite the increase, average heating expenditures this winter are about 15% below the five-year winter average.
Reliance on heating oil is highest in the Northeast, where about 21% of households use oil for space heating, down from 25% five years ago as an increasing number of homes switched to using natural gas and electricity for space heating. Nationwide, 5% of households use heating oil.
"Heating oil prices are expected to be higher than last winter because of higher crude oil prices and because of higher distillate fuel margins (the price difference between wholesale distillate fuel and crude oil)," the EIA said.
The Brent crude oil price is forecast to average $54/bbl this winter, which is $2/bbl higher than last winter "as a result of gradually tightening global oil balances."
Households heating primarily with electricity are forecast to spend an average of $74, or 8%, more this winter on their electricity bills, which is a result of 6% higher consumption, including both heating and non-heating uses of electricity, and about 2% higher residential electricity prices than last winter.
Among U.S. households, 40% rely on electricity as their primary heating source with nearly two-thirds of homes in the South heating primarily with electricity compared with only 16% in the Northeast.
The EIA expects households using propane will also spend more for home heating this winter because of stronger heating demand and higher propane prices, however the projected increases in expenditures from last winter vary by region. Households in the Northeast will spend an average of $221, or 11%, more this winter, reflecting prices that are about 6% higher and consumption that is 5% higher than last winter. Households in the Midwest should spend an average of $249, or 21%, more this winter, with forecast average prices that are 8% higher and forecast consumption that is 12% higher than last winter.
Propane prices are expected to be higher than last winter because of higher crude oil prices, which feed into higher prices for propane, and because of tighter propane supplies nationally, the EIA said.
About 5% of all U.S. households heat primarily with propane.