U.S. Energy Information Administration - EIA - Independent Statistics and Analysis
Short-Term Energy Outlook
Projected Winter Fuel Expenditures by Fuel and Region
The average household winter heating fuel expenditures discussed in this STEO provide a broad guide to changes compared with last winter. However, fuel expenditures for individual households are highly dependent on the size and energy efficiency of individual homes and their heating equipment, thermostat settings, local weather conditions, and market size (see Winter Fuels Outlook table). Expected temperatures based on the latest forecasts from the National Oceanic and Atmospheric Administration (NOAA) are much warmer than last winter east of the Rocky Mountains, with the Northeast 13% warmer, the Midwest 11% warmer, and the South 8% warmer. Given the current indicators signaling a strong El Nino/Southern Oscillation, forecast temperatures across much of the United States are projected to be warmer than the 10-year average. However, the past two winters provide a reminder that weather can be unpredictable, and the Winter Fuels Outlook includes forecasts for scenarios where heating degree days (HDD) in all regions may be 10% higher (colder) or 10% lower (warmer) than forecast.
Nearly half of all U.S. households heat with natural gas, and the average household could expect a 10% decrease in natural gas expenditures this winter compared with last winter given EIA's base case for temperatures. EIA forecasts a 6% decline in residential natural gas consumption this winter as temperatures are expected to be warmer than last winter. Additionally, residential prices for natural gas this winter are forecast to be 4% lower than last winter. Although EIA forecasts Henry Hub spot prices this winter will average 13% less than last winter, changes in spot prices do not quickly translate into lower delivered residential prices. The rates utilities charge for delivered natural gas can be set by state utility commissions a year or more in advance and reflect the cost of gas purchased over many months. Also, residential prices include a fixed component to cover utility operating costs and the cost to transport the natural gas.
Under a 10% colder scenario, EIA projects natural gas consumption to be 1% higher than last year, but expenditures would still be 4% lower than last year. Under a 10% warmer scenario, EIA expects declines of 14% in consumption and 17% in expenditures compared with last year.
Natural gas inventories have risen consistently during the storage injection season that typically runs from April through the end of October. EIA projects inventories will total 3,956 Bcf at the end of October, which would be a record high going into the heating season. Strong storage injections this summer reflect high summer production and expanded storage capacity. If early fall heating demand is low, it is possible that inventories could top 4,000 Bcf during November. Under the base case winter forecast, EIA expects inventories to end the winter at 1,892 Bcf. Even in the event of another cold winter, EIA does not expect stocks to fall below 1,000 Bcf by the end of this heating season.
Transportation constraints continue to pose a challenge to markets in the Northeast. Over the past two winters, natural gas-fired power plants in the Northeast had to compete for an increasingly limited amount of available natural gas pipeline capacity from a system that was already constrained, particularly in New England and New York. These constraints contributed to spikes in natural gas spot prices at regional hubs and, consequently, day-ahead power prices during periods when temperatures were extremely cold. Some pipeline capacity has been added to deliver natural gas from the Marcellus region in Pennsylvania to the New York market. However, pipeline constraints still exist in the Northeast, particularly into the New England market, and day-to-day price volatility is likely.
New England has two important marginal sources of natural gas supply for times of very high demand: liquefied natural gas (LNG) imports and pipeline imports from Canada. Although LNG imports have declined dramatically in the past several years, an LNG terminal near Boston still receives cargoes from Trinidad under long-term contracts. One of the terminal's customers is the adjacent Mystic Power Plant. LNG received at the Canaport LNG terminal in New Brunswick, Nova Scotia, also comes to New England via the Brunswick Pipeline.
EIA expects households heating primarily with heating oil to spend an average of $459 (25%) less this winter than last winter, reflecting retail prices that are 47 cents/gal (15%) lower and consumption that is 11% lower. In the 10%-colder-weather scenario, projected expenditures are $288 lower than last winter, with prices that are 39 cents/gal lower than last winter.
Heating oil prices are expected to be lower than last winter because of lower forecast crude oil prices and a relatively soft global distillate market compared with recent years. The Brent crude oil price is forecast to average $52/b this winter, which would be $13/b (32 cents per gallon) lower than last winter. Brent crude oil prices are forecast to remain below levels in recent years as the global oil market continues to experience an excess of supply to consumption. However, crude oil prices are highly uncertain, and any deviation in crude oil prices from forecast levels would cause a similar deviation in retail heating oil prices and consumer expenditures.
Distillate fuel supplies are also ample heading into the winter. Slowing economic growth in emerging economies, which have been major drivers of distillate consumption in recent years, has reduced growth in global demand for distillate fuel. Additionally, relatively strong gasoline refining margins during the past summer encouraged record-high global refinery runs. This combination of high refinery runs and slowing demand growth has resulted in high inventory levels in major distillate markets including Asia, northwest Europe, and the northeast United States. Distillate stocks in the Northeast totaled 45.1 million barrels on September 25, the highest for any week since late 2011. Reliance on heating oil is highest in the Northeast, where 23% of households use oil for space heating. Nationwide, only 5% of households use heating oil.
About 4% of all U.S. households heat primarily with propane. EIA expects these households to spend less this winter, but the projected decrease varies across regions. EIA expects that households heating with propane in the Midwest will spend an average of $320 (21%) less this winter than last winter, reflecting prices that are about 13% lower and consumption that is 9% lower than last winter. Households in the Northeast are expected to spend an average of $342 (15%) less this winter, with average prices that are about 5% lower and consumption that is 11% lower than last winter.
Heading into the winter months, U.S. inventories of propane and propylene reached 98.7 million barrels as of September 25, the highest level since EIA began collecting weekly propane inventory statistics in 1993 and 19 million barrels higher than at the same time last year. Primary propane stocks at the end of September in the Gulf Coast (PADD 3) were 18.9 million barrels (45%) higher than at the same time last year, and Midwest (PADD 2) stocks were almost 1.0 million barrels (3%) lower.
Inventories on the Gulf Coast have been the main contributor to the record high storage levels, with propane inventories in that region 84% above the five-year average for the week ending September 25. Much of this storage is at facilities connected to industrial users and export terminals, and transport of the propane to the Midwest and Northeast is often costly. Outside of the Gulf Coast, propane inventories in the rest of United States were 8% above the five-year average on September 25. Higher inventory levels and improved rail delivery networks for propane should contribute to more robust propane supply chains than two years ago, when the Midwest saw prices spike during extremely cold weather. However, local markets could still see tight supply conditions, particularly in cases of severely cold temperatures.
Households heating primarily with electricity are forecast to spend an average of $30 (3%) less this winter, as a result of 1% lower residential electricity prices and 2% lower consumption than last winter. About 39% of all U.S. households rely on electricity as their primary heating source, ranging regionally from 15% in the Northeast to 63% in the South.
Under a 10% colder scenario, EIA estimates that U.S. residential electricity consumption this winter would be 1% higher than during the winter of 2014-15. Residential electricity prices would not rise immediately, but the effect of colder temperatures would pass through to retail electricity rates over the succeeding months of 2016. Expenditures in the 10% colder scenario are forecast to be flat compared with last winter. The effect of colder temperatures on electricity prices would be greatest in New England, where residential prices would be relatively flat next year if there is a cold winter, in contrast to the baseline forecast of a 0.9% decline.
Two winters ago (2013-14), a winter freeze in the Northeast and constraints on supplying natural gas to power generators led to price spikes on regional wholesale electricity markets. The power industry in New England has recently become more reliant on natural gas for electricity generation, which could put generation fuel supplies in competition with natural gas used for space heating during cold spells. Power generators have been working to secure more fuel supplies through contracts before the winter months begin, in contrast to previous years. However, New England's natural gas pipeline capacity continues to be constrained, and any significant disruption to natural gas supply during a cold period could again lead to temporary spikes in wholesale electricity prices.
The use of cord wood and wood pellets as the primary residential space heating fuel has increased by 33% since 2005, to about 2.6 million households in 2014. About 8% of households use wood as a secondary source of heat, making wood second only to electricity as a supplemental heating fuel.
About 20% of homes in New England (1.1 million) used wood for space heating, water heating, or cooking in 2009 (EIA, Residential Energy Consumption Survey 2009), which is nearly twice the national rate. Almost half of all rural households in New England used wood, compared with only 12% of the region's urban households.
|Percent change in fuel bills from last winter (forecast)|
|Base case forecast||If 10% warmer than forecast||If 10% colder than forecast|
|* Propane expenditures are a volume-weighted average of the Northeast and Midwest regions. All others are U.S. volume-weighted averages. Propane prices do not reflect prices locked in before the winter heating season starts.|
Interactive Data Viewers
|Table SF01. U.S. Motor Gasoline Summer Outlook|
|Table SF02. Average Summer Residential Electricity Usage|
|Table 2. Energy Prices|
|Table 4a. U.S. Petroleum and Other Liquids Supply, Consumption, and Inventories|
|Table 5b. U.S. Regional Natural Gas Prices|
|Table 7b. U.S. Regional Electricity Retail Sales|
|Table 7c. U.S. Regional Retail Electricity Prices|
|Table 9c. U.S. Regional Weather Data|
|U.S. Natural Gas Prices||XLSX||PNG|
|U.S. Gasoline and Distillate Inventories||XLSX||PNG|
|U.S. Residential Electricity Price||XLSX||PNG|
|U.S. Winter Heating Degree Days||XLSX||PNG|
|U.S. Census Regions and Census Divisions||XLSX||PNG|