U.S. ENERGY INFORMATION ADMINISTRATION
Americans Can Expect Lower Heating Fuel Bills This Winter
This winter is expected to bring lower heating bills than those seen last winter, according to forecasts released today by the Energy Information Administration (EIA) in the October Short-Term Energy Outlook and "Winter Fuels Outlook: 2001/2002." Assuming normal weather, winter heating bills for residential consumers could average from $170 to $320 lower than last winter.
The main reasons for this lower forecast are:
* Demand for space heating fuels is expected to be lower than last winter, when the weather was about 7 percent colder than normal.
* Inventories of key heating fuels--especially natural gas--are above normal levels for this time of year and substantially above those at the outset of the winter of 2000-2001.
* Crude oil and natural gas prices are at lower levels than they were last year.
In contrast to last winter, there is less concern about quantity constraints and the potential for extraordinary price fly-ups among the major heating fuels this winter. This is particularly true for natural gas and propane, based on the ample pre-season supplies that have been put into storage. Somewhat more risk may apply to distillate fuel (heating oil), which still has inventory levels somewhat below average, particularly in the Midwest where there are refinery outages.
Other highlights for the Short-Term Energy Outlook include:
* World oil prices initially rose in September following the terrorist attack, but then fell sharply as OPEC reassured world markets that it would maintain plentiful supplies, leaving the market to focus on world oil demand, which was weakening even before the crisis. The U.S. average imported crude oil price in September was an estimated $22 per barrel, down about $1.90 per barrel from August levels, while the U.S. benchmark West Texas Intermediate crude oil price averaged almost $26 per barrel in September.
* In the near-term, the largest impact on world oil demand is expected to come from the large drop in global demand for jet fuel. Worldwide jet fuel demand is estimated to have fallen by about 10 percent outside the United States and by as much as twice that within the United States. In addition, revised economic estimates indicated that the United States, viewed as the engine for global economic growth, may be in the midst of a recession. These two factors have resulted in EIA's lowering its global oil demand projections for fourth quarter 2001 by 700,000 barrels per day.
* The outlook for 2002 projects that commercial jet fuel use will recover somewhat and that global jet fuel demand will be down by roughly 5 percent. Weaknesses in the world's economies are projected to reduce growth further, leaving OPEC to supply a world oil market that is smaller in 2002 than previously projected. The projected growth in world oil demand in 2002 is now projected at 900,000 barrels per day.
* Lower economic activity has generated conditions that greatly reduce natural gas demand in the industrial sector. Weak industrial demand and generally moderate summer weather have generated a collapse in natural gas prices and bulging underground storage levels for gas. Assuming normal weather, and barring any major production disruptions-- such as a hurricane in the Gulf-- by the start of the heating season, working gas in underground storage is projected to be close to 20 percent above last year's level and about 10 percent above the previous 5-year average. The weakened economy is expected to hold prices below $2.50 per thousand cubic feet throughout the forecast period. Wellhead prices this winter are projected to be less than half the price they were last winter.
* Electricity demand is expected to fall by about 1.0 percent this winter, compared with last winter's demand growth of 4.6 percent, due both to the slower economy and the assumption of normal winter weather compared with last year's cold weather. Over the whole year 2001, electricity demand growth is expected to be lower than it was in 2000 mainly because the economy has been growing much more slowly than it was in 2000. Industrial demand growth for electricity is expected to be sharply negative in 2001 compared to its 2000 level, falling by 4.4 percent, but to revive somewhat in 2002 along with the economy. The industrial sector has been impacted by the economic slowdown as well as by the high natural gas prices during the first half of 2001.
The Short-Term Energy Outlook (STEO) 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/steo/.
The "Winter Fuels Outlook: 2001/2002" is an in-depth look at winter fuel markets based on the projections provided in the STEO. This article may be viewed by going to the STEO web site provided above and selecting "Winter Fuels Outlook" from the menu. The direct internet address is http://www.eia.gov/emeu/steo/pub/special/win2001/winfuel.html.
EIA Program Contact: : David Costello, 202/586-1468