U.S. ENERGY INFORMATION ADMINISTRATION
Americans Can Expect Higher Heating Fuel Bills This Winter
This winter is expected to bring with it higher heating bills than those seen last winter, according to forecasts released today in the October Short-Term Energy Outlook. Under normal weather assumptions, winter heating bills for residential consumers could average from $190 to $240 higher than last winter. The main reasons for this forecast are:
* Demand for space-heating fuels is expected to be higher than last winter, which was the warmest on record.
According to the Energy Information Administration (EIA), higher prices for West Texas Intermediate (WTI) crude oil, which rose from a monthly average of $23.80 per barrel in September 1999 to $33.88 per barrel in September 2000, have led to higher prices for all petroleum products this year compared to 1999 levels. Despite some easing of crude oil prices since late September, fuel prices this winter are expected to remain well above year-ago levels.
In the event of a very cold winter, current fuel market supplies could be strained to meet higher demands. The resulting high spot prices, reflecting the tight supplies, could be expected to lead to "supply-side" responses, such as increased heating-oil supplies brought about by higher refinery utilization rates, distillate yields, and imports. But whether these responses would be enough to avoid sustained run-ups in prices in the event of very cold weather is uncertain, even under assumptions of undisrupted operations of domestic refining, pipeline and field production facilities.
Other highlights for the Short-Term Energy Outlook include:
* West Texas Intermediate prices, though still high by historical standards, are now well below the daily averages (over $37 per barrel) reached prior to the Clinton Administration's announcement of a limited exchange of Strategic Petroleum Reserve (SPR) oil on September 22. EIA estimates that the SPR exchange will add to world crude oil supply and make an additional 10 million barrels of crude oil available to refiners in the United States. This additional supply will either replenish crude oil stocks or be processed into refined products between now and the end of the year.
* U.S. residential heating oil prices averaged an estimated $1.34 per gallon in September, approximately 44 cents per gallon above the price in September 1999. Actual retail prices in some areas were well above this level. Gradually declining crude oil prices and winter weather patterns close to normal conditions may limit additional increases through the winter peak demand period to as little as 5 cents per gallon. Base case conditions would be expected to yield average winter retail prices of $1.37 per gallon, compared to $1.18 per gallon last winter. Year-over-year increases would be particularly significant in the fourth quarter of 2000.
* Average spot prices for natural gas are estimated to have averaged about $4.96 per thousand cubic feet in September, nearly double the price from one year ago. The year-over-year differential is likely to widen somewhat by yearend. Although rising crude oil prices have encouraged natural gas prices to increase, the primary cause of these elevated gas prices has been the strained supply situation. U.S. working gas in storage is estimated to be about 9 percent below normal and about 12 percent below the year-ago level. Increases in gas production this year generally have failed to keep pace with increasing demand. In mid to late September, rates of injection into storage improved somewhat, suggesting that supply conditions may be improving.
* This winter's heating degree-days (HDD) are assumed to be at normal levels and thus 11 percent above last winter's HDD. This winter, total electricity demand is expected to be about 2.8 percent above the year-ago level under normal weather assumptions, driven by increased demand in the residential and commercial sectors, which are expected to post growth of 4.6 and 3.9 percent, respectively.
The Short-Term Energy Outlook is published monthly on EIA's Internet Web Site to meet the public's demand for timely energy data and forecasts. Users can view and download the forecast analysis, tables and charts by going to the EIA Home Page at http://www.eia.gov and selecting "Forecasts" from the menu. The Internet address for direct access to the Outlook is: http://www.eia.gov/emeu/steo/pub. In addition to the Internet releases, the Short-Term Energy Outlook is published in printed form in April and October.
Printed copies of the Short-Term Energy Outlook, October 2000 will be available later this month from the U.S. Government Printing Office, 202/512-1800, or through EIA's National Energy Information Center at 202/586-8800.
EIA Program Contact: David Costello, 202/586-1468