U.S. Govt Warns of Sharply Higher Heating Costs

American consumers will feel the impact of record-high crude oil prices with winter home heating oil bills jumping by about 28 percent and natural gas costs rising by 15 percent, the U.S. government said on Wednesday.

Reuters
American consumers will feel the impact of record-high crude oil prices with winter home heating oil bills jumping by about 28 percent and natural gas costs rising by 15 percent, the U.S. government said on Wednesday.

“This winter, tight global oil markets and elevated crude oil prices are expected to result in higher heating oil, natural gas and propane prices,” the Energy Information Administration said in its annual winter forecast.

The average Northeast household will pay a total of $1,223 for heating oil this winter, double the price paid three years ago and up from $953 last year, according to the EIA.

The average Midwest household will pay a total of $1,003 to heat with natural gas this winter, up from $870 last winter.

U.S. crude oil prices set a new record high of $51.48 per barrel in trading in overnight dealings on Wednesday. Some energy analysts say prices might approach $60 a barrel in the coming weeks.

The Energy Department’s analytical arm said it expects U.S. winter oil prices to average $46.43 in the current quarter and $44.71 in the first quarter of next year.

The EIA said below-normal oil inventories in the United States and other industrial countries have raised concerns about the adequacy of supply to meet growing oil demand. As a result, the average monthly U.S. oil price is not expected to fall below $40 a barrel until the end of 2005, it said.

COLDER TEMPERATURES THIS WINTER?

Separately, the National Oceanic and Atmospheric Administration issued a winter forecast calling for colder-than-normal temperatures in the U.S. Southeast and mid-Atlantic regions. NOAA said it was unable to predict if the Midwest and Northeast would be colder, warmer or average this winter.

However, some private forecasters say the coming winter will be chillier than last year, boosting demand for heating oil and natural gas.

Oil inventories remain below normal largely because about 500,000 barrels per day (bpd) of offshore oil production was lost in September due to hurricanes in the Gulf of Mexico. Total U.S. oil production in September averaged just over 5.million bpd, the lowest since at least 1954, the EIA said.

The unexpected loss of offshore crude oil production has so far forced four refiners to borrow oil from the Energy Department’s emergency stockpile in recent days.

“Industry officials estimate that resumption of normal (Gulf oil production) operations could take between 45 and 90 days,” the EIA said.

Oil prices have also risen on strong demand from rapidly developing countries like China and India.

NATURAL GAS DEMAND UP

Demand for natural gas is forecast to be up 1.5 percent this winter, the EIA said.

“Not only is the typical residential and commercial customer expected to increase natural gas consumption during this heating season compared to last winter, but the number of such customers is expected to increase as well,” it said.

The average wellhead price for natural gas is projected to be $6.04 per thousand cubic feet (mcf) this winter, sharply higher from $4.92 per mcf last winter, and the residential price will be almost double that level, EIA said.

The following table details the EIA’s forecast of costs for users of natural gas, heating oil and propane this winter:

U.S. CONSUMER USE OF HEATING FUELS

2001/02 2002/03 2003/04 —2004/05—

Actual Actual Actual estimates

Sept Oct

NATURAL GAS

Consumption (mcf) 81.3 94.9 89.1 96.2 92.3

Avg price ($/mcf) 7.41 8.40 9.77 10.50 10.86

Winter bill ($) 602 797 870 1,010 1003

HEATING OIL

Consumption (gal) 577 743 700 697 698

Avg Price ($/gal) 1.10 1.34 1.36 1.60 1.75

Winter bill ($) 637 995 953 1,114 1,223

PROPANE

Consumption (gal) 803 940 882 951 914

Avg Price ($/gal) 1.11 1.20 1.30 1.40 1.53

Winter bill ($) 888 1,124 1,147 1,335 1,396