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Short-Term Energy Outlook

Release Date: Feb. 6, 2024  |  Forecast Completed: Feb. 1, 2024  |  Next Release Date: Mar. 12, 2024  |  Full Report    |   Text Only   |   All Tables   |   All Figures

Winter Fuels Outlook 2023–24


Changes in households’ heating fuel expenditures for the upcoming winter will likely vary significantly by region and main heating fuel. Because we expect natural gas prices will be lower than last year, the 46% of U.S. households that use natural gas as their main heating fuel will likely spend less on heating this winter compared with last winter.

data visualization of winter energy expenditures in three cases
Data source: U.S. Energy Information Administration, Winter Fuels Outlook

In addition, temperatures in the western United States in our forecast are warmer than last year, which was very cold in that region. As a result, households in the West, regardless of fuel, will likely spend less on heating this winter compared with last winter. Together, households that either heat with natural gas or are in the West account for 56% of all U.S. households.

We expect that the remaining 44% of households will spend within about 5% of last winter’s expenditures. For homes that primarily heat using electricity, we expect expenditures are mostly in line with last winter, and they do not vary much based on weather outcomes.

In our base temperature case, we expect expenditures for homes that heat primarily with propane or heating oil will be down slightly, but expenditures for homes that use those fuels will depend highly on weather outcomes.

U.S. average household fuel expenditures in three cases
households categorized by primary heating fuel
Base
Case
%
change
10%
Colder
%
change
10%
Milder
%
change
Northeast 761 -18% 827 -10% 719 -22%
Midwest 581 -21% 618 -15% 561 -23%
South 494 -15% 527 -9% 476 -18%
West 590 -30% 644 -24% 552 -34%
United States 601 -21% 647 -15% 574 -25%
Base
Case
%
change
10%
Colder
%
change
10%
Milder
%
change
Northeast 1,465 +4% 1,545 +9% 1,403 -1%
Midwest 1,213 -2% 1,280 +3% 1,162 -6%
South 1,001 +2% 1,047 +7% 965 -2%
West 1,007 -9% 1,058 -5% 967 -13%
United States 1,063 -1% 1,114 +3% 1,024 -5%
Base
Case
%
change
10%
Colder
%
change
10%
Milder
%
change
Northeast 1,696 +1% 2,057 +23% 1,398 -17%
Midwest 1,294 -11% 2,030 +40% 1,269 -13%
South 1,184 +6% 1,524 +36% 1,021 -9%
United States 1,343 -3% 1,847 +34% 1,205 -13%
Base
Case
%
change
10%
Colder
%
change
10%
Milder
%
change
United States 1,851 +8% 1,969 +14% 1,648 -4%
Data source: U.S. Energy Information Administration, Winter Fuels Outlook
Note: Percentage change values are relative to previous winter. Propane expenditures are a household-weighted average of the Northeast, Midwest, and South regions.

Because demand for heating fuels in the winter exceeds production, inventories are an important source of supply. Growth in natural gas production over the past year has put inventories for propane and natural gas above the five-year average heading into this winter. These relatively high inventories have helped keep prices for those fuels below year-ago levels. However, distillate fuel inventories (a category which includes heating oil) are well below the five-year average.

Energy expenditures

Expenditures on space heating fuel have three main determinants: household characteristics, weather, and energy prices. The following three sections give a broad overview of those determinants for this winter, followed by a more specific discussion for each of the four main heating fuels.

The price and expenditure values presented in this report are mostly in nominal terms. Based on forecasts for the Consumer Price Index from the S&P Global macroeconomic model, we assume inflation will average 3% this winter, meaning that an average basket of consumer goods will cost 3% more compared with last winter. Given that rate of inflation, changes in expenditures and prices adjusted for inflation would be roughly 3% less than the values reported.

Household characteristics

The average household expenditures discussed in the Winter Fuels Outlook (WFO) are broad measures for comparing recent winters. The data we present reflect energy expenditures for all uses of a home’s primary heating fuel, not just heating. Fuel expenditures for individual households depend on the size and energy efficiency of individual homes and their heating equipment, along with thermostat settings and weather conditions. Each fuel also has its own market structure, physical infrastructure, regulations, and limitations that can affect the connection between wholesale and retail market events.

data visualization of energy expenditures based on household heating fuel
Data source: U.S. Energy Information Administration, Residential Energy Consumption Survey 2020
Data values: Table CE4.16: Annual household end-use expenditures by fuel in the U.S. - averages

We use our Residential Energy Consumption Survey (RECS) as a base to estimate average energy consumption during the winter in each region. This WFO is the first to incorporate the recently released 2020 RECS. We group households by primary space heating fuel: natural gas, heating oil, electricity, and propane.

U.S. households by primary heating fuel
thousand households, as of October of each year
2018 2019 2020 2021 2022 2023 %
change
Northeast 12,295 12,307 11,959 11,924 12,052 12,234 +2%
Midwest 18,269 18,337 18,002 17,945 17,943 17,971 +0%
South 14,061 14,248 14,255 14,401 14,456 14,467 +0%
West 15,559 15,694 15,367 15,243 15,345 15,417 +0%
United States 60,184 60,586 59,583 59,514 59,795 60,088 +0%
2018 2019 2020 2021 2022 2023 %
change
Northeast 3,521 3,509 3,681 3,958 3,990 4,069 +2%
Midwest 6,023 6,012 6,197 6,446 6,593 6,813 +3%
South 30,771 31,002 31,678 32,713 33,393 34,134 +2%
West 9,611 9,682 10,112 10,573 10,579 10,714 +1%
United States 49,926 50,205 51,668 53,690 54,555 55,730 +2%
2018 2019 2020 2021 2022 2023 %
change
Northeast 1,031 1,033 1,118 1,229 1,213 1,227 +1%
Midwest 2,179 2,178 2,174 2,249 2,201 2,175 -1%
South 1,864 1,914 1,910 1,903 1,977 2,032 +3%
West 975 998 1,029 1,068 1,076 1,080 +0%
United States 6,048 6,123 6,232 6,450 6,466 6,513 +1%
2018 2019 2020 2021 2022 2023 %
change
Northeast 4,610 4,694 4,448 4,155 4,046 3,923 -3%
Midwest 269 276 257 231 219 208 -5%
South 576 588 558 492 486 481 -1%
West 214 217 207 195 185 177 -5%
United States 5,669 5,775 5,471 5,072 4,936 4,789 -3%
2018 2019 2020 2021 2022 2023 %
change
Northeast 448 458 423 384 370 347 -6%
Midwest 497 513 470 416 429 430 +0%
South 473 490 432 378 385 382 -1%
West 670 687 628 576 601 611 +2%
United States 2,088 2,148 1,953 1,753 1,785 1,770 -1%
2018 2019 2020 2021 2022 2023 %
change
Northeast 451 459 517 554 561 592 +5%
Midwest 347 354 372 382 400 420 +5%
South 455 482 590 711 705 717 +2%
West 1,091 1,072 1,087 1,122 1,208 1,300 +8%
United States 2,344 2,367 2,565 2,769 2,874 3,029 +5%
Data source: U.S. Energy Information Administration, Winter Fuels Outlook
Note: Percentage change value is relative to previous winter.

The total winter expenditure data we show represents all uses for each primary heating fuel, not just the portion attributable to heating. For example, the expenditures included for households that heat primarily with electricity in this report would also include electricity used for appliances and lighting. Because electricity has the widest range of uses among the fuels, electricity consumption tends to be less sensitive to changes in temperature than other fuels.

On average, we expect wholesale commodity natural gas prices to be higher this winter compared with last winter, which leads to higher prices for both natural gas and electricity in the retail market. Natural gas prices rose sharply earlier this year because consumption growth outpaced production growth in the first half of 2022. Strong demand growth resulted from growing liquefied natural gas (LNG) exports as well as a new market dynamic driving strong domestic natural gas demand: limited natural gas-to-coal switching in the electric power sector.

Natural gas is the main space heating fuel in 46% of U.S. homes, making it the most widely used heating fuel in the country. Electricity is also widely used, with the highest concentration of homes with electric heat in the South. The share of U.S. homes that use electricity as a primary space heating fuel has grown to 41%, up from 38% ten years ago.

four maps showing the prevalence of heating fuels in each state
Data source: U.S. Census Bureau American Community Survey

Propane and heating oil are the primary space heating fuels in a much smaller share of homes nationally but are used widely in regions that tend to have the some of the coldest winters. Propane use is highest mostly in the upper Midwest and Northeast. Heating oil use is highest in the Northeast.

Average consumer expenditures in U.S. homes
categorized by primary heating fuel
Expenditures (dollars)%
change
Nov Dec Jan Feb Mar total
Northeast 127 160 181 155 139 761 -18%
Midwest 100 129 137 115 100 581 -21%
South 87 111 125 94 77 494 -15%
West 101 137 137 113 102 590 -30%
U.S. average 102 133 143 118 105 601 -21%
Price (dollars per million cubic feet)%
change
Nov Dec Jan Feb Mar total
Northeast 14.21 13.08 12.90 12.71 12.87 13.10 -22%
Midwest 10.24 9.41 8.85 8.90 9.33 9.28 -23%
South 14.08 12.10 12.15 11.64 12.57 12.40 -22%
West 13.62 13.81 14.15 13.55 13.62 13.77 -17%
U.S. average 12.53 11.72 11.49 11.24 11.73 11.70 -21%
Consumption (million cubic feet)%
change
Nov Dec Jan Feb Mar total
Northeast 9 12 14 12 11 58 +6%
Midwest 10 14 15 13 11 63 +3%
South 6 9 10 8 6 40 +9%
West 7 10 10 8 8 43 -15%
U.S. average 8 11 12 10 9 51 -0%
Expenditures (dollars)%
change
Nov Dec Jan Feb Mar total
Northeast 241 292 337 313 282 1,465 +4%
Midwest 213 253 272 250 224 1,213 -2%
South 174 212 232 207 176 1,001 +2%
West 187 210 221 199 189 1,007 -9%
U.S. average 187 222 241 218 194 1,063 -1%
Price (cents per kilowatthour)%
change
Nov Dec Jan Feb Mar total
Northeast 21.50 21.30 22.31 22.85 22.30 22.07 -0%
Midwest 14.44 13.64 13.47 14.06 14.37 13.95 -4%
South 13.51 12.90 13.07 13.64 13.56 13.31 -3%
West 16.99 15.88 16.97 16.82 17.02 16.71 +1%
U.S. average 15.37 14.66 15.01 15.47 15.52 15.18 -2%
Consumption (kilowatthours)%
change
Nov Dec Jan Feb Mar total
Northeast 1,121 1,373 1,509 1,370 1,264 6,636 +4%
Midwest 1,475 1,857 2,022 1,779 1,560 8,693 +2%
South 1,291 1,645 1,775 1,517 1,296 7,523 +5%
West 1,103 1,323 1,302 1,185 1,114 6,027 -10%
U.S. average 1,216 1,513 1,607 1,411 1,251 6,999 +1%
Expenditures (dollars)%
change
Nov Dec Jan Feb Mar total
Northeast 263 354 404 356 319 1,696 +1%
Midwest 196 285 321 272 227 1,294 -11%
South 186 269 300 240 188 1,184 +6%
U.S. average 208 293 331 279 232 1,343 -6%
Price (dollars per gallon)%
change
Nov Dec Jan Feb Mar total
Northeast 3.13 3.12 3.13 3.15 3.16 3.14 -5%
Midwest 1.83 1.92 1.92 1.94 1.95 1.91 -13%
South 2.93 2.92 2.93 2.95 2.96 2.94 -3%
U.S. average 2.44 2.46 2.46 2.48 2.48 2.57 -6%
Consumption (gallons)%
change
Nov Dec Jan Feb Mar total
Northeast 84 113 129 113 101 540 +6%
Midwest 107 149 167 140 116 679 +2%
South 64 92 102 82 64 403 +9%
U.S. average 85 119 134 112 93 545 +4%
Expenditures (dollars)%
change
Nov Dec Jan Feb Mar total
U.S. average 287 395 451 384 335 1,851 +8%
Price (dollars per gallon)%
change
Nov Dec Jan Feb Mar total
U.S. average 4.28 4.23 4.21 4.17 4.14 4.20 -2%
Consumption (gallons)%
change
Nov Dec Jan Feb Mar total
U.S. average 67 93 107 92 81 440 +10%
Data source: U.S. Energy Information Administration, Winter Fuels Outlook
Note: Percentage change value is relative to previous winter. Propane expenditures are a household-weighted average of the Northeast, Midwest, and South regions.

Weather assumptions

Weather assumptions in the WFO are a combination of data from National Oceanic and Atmospheric Administration (NOAA) and the previous 30-year trend. We use heating degree days (HDDs) as a measure of how cold temperatures are compared with a base temperature—more HDDs indicate colder temperatures.

We assume temperatures for the winter of 2023–24 in the eastern part of the country will be slightly colder than last winter, but warmer than the average of the previous 10 winters. However, in the West, our forecast assumes that this winter will be warmer than last winter, which was very cold, and warmer than the average of the previous 10 winters.

Beginning in this year’s WFO, we are considering winter to run from November through March. In previous years, we had considered winter to also include October. However, October only accounted for 6% of winter heating demand over the past ten years, and it has fewer HDDs on average than April. The previous winters referenced in this report have been recalculated to exclude October data.

data visualization of heating degree days in different definitions of winter
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Regional Weather Data

We expect that this winter will have 3% fewer HDDs in the United States compared with the 10-year average, with some variation occurring between the different regions. We expect that the West will have 18% fewer HDD, while the South will have 11% more HDD. In the Northeast, we assume there will be 7% more HDD than last winter, and in the Midwest, there will be 3% more.

Because weather is a significant source of uncertainty in these forecasts, the WFO includes side cases where, measured in HDDs, all regions are 10% colder or 10% warmer than the base forecast.

data visualization of winter season heating degree days
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Regional Weather Data

Cold weather can affect household heating expenditures in two ways. First, cold weather raises the amount of energy required to keep a house at a specific temperature. Second, because cold weather raises demand and could cause supply disruptions, it can cause energy prices to rise, which could be more severe if fuel inventories are low, as is currently the case with heating oil. In the cases we consider, we adjust for both effects.

Current indications show a high probability that the El Niño climate pattern in the Pacific Ocean will affect weather in the United States this winter. Although the effects of each El Niño event are different, NOAA notes that “El Niño in general acts to tilt the odds toward wetter- and cooler-than-average conditions across much of the South, and toward drier and warmer conditions in many of the northern regions.”

Heating degree days by census region
degree days
Nov Dec Jan Feb Mar total %
change
Northeast 642 929 1,084 926 805 4,386 +7%
Midwest 743 1,087 1,239 1,020 825 4,913 +3%
South 306 495 563 425 308 2,098 +11%
West 463 663 645 538 474 2,783 -18%
United States 489 729 809 658 537 3,223 +0%
Data source: U.S. Energy Information Administration, Winter Fuels Outlook
Note: Percentage change value is relative to previous winter.

Wholesale market conditions and prices

In general, we expect the prices residential consumers pay for fuels to be lower than last winter. The lower prices are most notable for natural gas. Retail natural gas prices have been falling on a year-over-year basis since May. The falling retail prices are the result of a steep drop in natural gas spot prices. The spot price for natural gas at Henry Hub in Louisiana averaged $2.66 per thousand cubic feet (Mcf) in September, down 55% from September 2022. The U.S. average residential price in September was down 21% from a year ago.

Natural gas spot prices have fallen as natural gas inventories rose above the five-year average in early 2023 and have stayed above average this year, supported by growth in U.S. natural gas production. The growth in natural gas production has come despite the decline in natural gas prices because of rising natural gas production that is associated with crude oil production in the Permian Basin that is not sensitive to natural gas prices. Although natural gas inventories remain above the five-year average, the surplus to average has been narrowing over the summer because of strong demand for natural gas in the electric power sector.

Retail prices for heating oil and propane in our forecast are also lower than last year. Although the crude oil prices that affect heating oil and propane retail prices are similar to crude oil prices a year ago, the prices for wholesale heating oil and propane have fallen relative to the price of crude oil.

Propane prices have fallen because of rising natural gas production. Propane can be produced by either a natural gas processing plant or by a petroleum refinery. With a rising share of propane production coming from natural gas processing plants in recent years, high natural gas production in 2023 has led to record levels of propane inventories, putting downward pressure on propane prices.

Heating oil prices have fallen because of falling refining margins for distillate fuel (which includes heating oil and diesel). Refining margins are about 30 cents per gallon lower than at this time last year. Several factors have contributed to the lower margins including falling demand for U.S. distillate fuel, expanded U.S. and global refinery capacity, more distillate exports from China, and the normalization of distillate supply chain that were severely disrupted after Russia’s full-scale invasion of Ukraine in 2022. Despite lower refining margins compared with last year, distillate inventories remain low, and margins remain well above the five-year average. Russia’s recent ban of distillate exports creates uncertainty for heating oil prices heading into winter.

In addition to price changes related to propane and heating oil markets specifically, prices for these fuels reflect the price of crude oil as well. We expect the Brent crude oil spot price will remain above $90/b through 1Q24. Crude oil prices have risen above $90/b in recent months prices primarily because Saudi Arabia has continued to extend voluntary crude oil production cuts, leading to declining global oil inventories. We forecast that inventory draws will continue through 4Q23, as OPEC+ cuts oil production keep global oil production lower than global oil demand. The potential for continued voluntary production cuts creates some upside risk for oil prices heading into 2024.

data visualization of wholesale and retail prices for natural gas, propane, and heating oil
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: Real Prices Viewer

Wholesale market conditions affect fuels differently. Changes in retail natural gas prices lag changes in wholesale natural gas prices, largely due to the nature of utility regulation. Over longer periods, changes in natural gas wholesale and retail prices are more closely correlated. Some state utility commissions set the rates that utilities can charge for natural gas deliveries a year or more in advance of billing to reflect the cost of wholesale natural gas that utilities purchased over many months.

The timing and frequency of rate changes can vary by utility, however, and in times of high price volatility, some utilities make adjustments as often as several times in a year. In addition, residential prices include charges to cover utility operating costs and the cost to transport and distribute natural gas, which are not directly linked to wholesale commodity natural gas prices.

The prices residential consumers pay for electricity lags changes in wholesale spot prices in a fashion similar to natural gas. Electricity prices charged to ultimate customers reflect the costs of supplying the electricity and delivering it to households. Increases in costs pass through to customers more quickly in areas of the country with deregulated markets where consumers have a choice of electricity providers.

Wholesale electricity prices in the third quarter of 2023 were down across most of the United States, except for Texas. The decline in wholesale prices largely reflects the lower cost generators paid for natural gas this year, and we expect U.S. average retail electricity prices will be down slightly from last year as wholesale changes slowly pass through to retail rates.

Wholesale price changes for heating oil and propane are passed to consumers quickly because those markets do not have regulated rates similar to natural gas and electricity. We generally estimate that changes in wholesale fuel prices are fully reflected in retail prices over a period of four-to-six weeks.

Many heating oil and propane users buy supplies ahead of the winter and refill as needed. When forecasting expenditures, our calculations do not account for fuel that consumers purchase ahead of its use or fuel that was contracted at prices set before the start of the winter. We assume households pay the prevailing retail price for heating oil and propane at the time they use it.

Natural gas

This winter we expect a decrease in natural gas expenditures in all scenarios driven by a decrease in natural gas prices. In the base case, we expect prices to decline by 24% ($3.50/Mcf) from last winter, translating to a 24% ($178) decrease in expenditures even though we expect consumption to be about the same as last winter.

data visualization of winter energy expenditures in three cases in homes heated with natural gas
Data source: U.S. Energy Information Administration, Winter Fuels Outlook

We are also forecasting a 24% decline in the natural gas price in the warmer scenario. However, because we are expecting 7% (3 Mcf) less consumption, this scenario results in 29% ($217) lower expenditures compared with last winter. In the colder scenario, we expect an 8% (4 Mcf) increase in consumption, however, this scenario still results in a decline in expenditures of 16% ($118) because of a 22% ($3.29/Mcf) decline in the natural gas price.

Natural gas prices and expenditures decrease in all three scenarios and in every region in this year’s WFO. In the West, consumption decreases in every scenario, even the colder scenario, because our forecast includes more normal temperatures compared with the widespread below-normal temperatures last winter, which resulted in the highest natural gas consumption in that region since the winter of XX-XX. In contrast, consumption in the Northeast last winter was the lowest since the winter of XX-XX, similar to our forecasted consumption in the warmer scenario.

data visualization of natural gas supply and disposition components
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Natural Gas Supply, Consumption, and Inventories

U.S. natural gas production growth this year has outpaced growth in liquefied natural gas (LNG) exports and record consumption in the electric power sector this summer, resulting in above-average storage levels and lower natural gas prices. U.S. production of dry natural gas averaged 102.5 Bcf/d in the first half of 2023, an increase of 4% (4.3 Bcf/d) from annual 2022 production. Natural gas gross exports in the first half of 2023 averaged 20.4 Bcf/d, also an increase of 4% (0.8 Bcf/d) from the same period in 2022.

We expect LNG exports to be flat through the second half of 2023 driven by lower demand from Europe because of relatively full storage inventories. Despite lower-than average storage injections in July, August, and September and record natural gas consumption in the electric power sector, we expect natural gas supplies will be sufficient to meet winter demand in the base case scenario.

U.S. Lower 48 working natural gas inventories are 3,400 Bcf as of September 29, which is 6% (200 Bcf) more than the five-year average (2018–2022) for this time of year. Inventories in all five regions in the Lower 48 are above the five-year average heading into the winter heating season.

data visualization of natural gas inventories
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Natural Gas Supply, Consumption, and Inventories

This winter, we forecast higher temperatures in the western United States compared with last year, and lower temperatures in the eastern United States. In our base forecast, we expect colder weather in the eastern United States will increase natural gas consumption compared with last year, resulting in higher natural gas storage withdrawals. Inventories in the East, Midwest, and South Central regions will decline from the highs last winter, but remain above the five-year average.

We expect warmer weather in the western United States compared with last winter, resulting in decreased natural gas consumption and lower withdrawals of natural gas from storage. Operators in the West region, in particular California, have been rapidly restocking their storage inventories this summer after storage levels fell to a large deficit to the five-year average at the end of last year’s winter heating season. In our base forecast, we expect inventories in the West region to decline at a slower rate than last winter, ending the heating season close to the five-year average The increase in storage capacity at the Aliso Canyon storage facility near Los Angeles should support inventory levels on the West Coast this winter.

Propane

Propane is used as a winter heating fuel in 5% of U.S. households, mostly in rural areas of the Midwest, Northeast, and South. Propane is also used in commercial grain dryers as well as industrially as a petrochemical feedstock. We expect that households heating with propane in the Northeast will spend an average of $1,640 per household, which is 7% more than last winter. Our forecast increase in Northeast expenditures for propane-fueled heating is based on our forecast that the region’s propane prices will be 1% higher and there will be 6% more household propane consumption, on average.

data visualization of winter energy expenditures in three cases in homes heated with propane
Data source: U.S. Energy Information Administration, Winter Fuels Outlook

We expect households in the Midwest to spend 8% more than last winter (about $1,440 per household), reflecting a forecast for a 6% increase in propane prices and slightly higher propane consumption from last winter. In the South, we expect households to spend 11% more than last winter (about $1,330 per household), reflecting an 8% increase in consumption and a 2% increase in propane prices.

Weather will be a key determinant of propane market outcomes and consumer expenditures this winter. If the winter is 10% colder, we expect significant upward pressure on wholesale propane prices that would quickly be passed along to retail prices and affect consumer expenditures. In the colder scenario, we forecast that household expenditures for propane will be 21% higher than the base case in the Northeast, 23% higher in the Midwest, and 18% higher in the South. In the warmer scenario, our forecast expenditures will be about 20% lower across all three regions compared with the base case.

Propane prices typically follow the price of crude oil and natural gas but can vary significantly depending on supply and demand conditions, particularly in response to winter weather. The propane spot price at the U.S. benchmark location of Mont Belvieu, Texas was $0.76/gal in September, which is 4% lower than the price in March, or the end of the 2022–23 winter heating season. We forecast that the Mt. Belvieu spot price will average $0.79/gal throughout the winter, 2% lower than the previous winter.

data visualization of propane supply and disposition components
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Hydrocarbon Gas Liquids (HGL) and Petroleum Refinery Balances

We forecast propane gas plant and refinery production to rise by about 6% this winter compared with last winter. We expect U.S. propane consumption across all sectors to be up about 12% this winter compared with last winter, which results from an increase in propane use for space heating and for petrochemical production. Despite higher consumption than last winter, propane consumption in our forecast is slightly lower than the 2017–22 winter average. Propane consumption during last winter was the lowest in more than a decade. From October to November, propane is consumed in commercial grain dryers when the corn harvest takes place. When the corn crop reaches maturity in late September or early October, producers can allow the crop to dry in the field, reducing the demand for propane for commercial grain drying.

The current harvest is ahead of the five-year average, with increasingly poor crop conditions, so we expect minimal grain drying demand for propane. The United States exports more propane than it consumes, and we forecast U.S. propane net exports to be 6% higher this winter than last winter. Higher propane exports reflect elevated global demand for propane as a petrochemical feedstock, especially in East Asia.

data visualization of propane inventories
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Hydrocarbon Gas Liquids (HGL) and Petroleum Refinery Balances

Propane inventories are highly seasonal. Inventories typically build from April to September, when propane consumption is relatively low, and fall during the winter heating season. As of September 29, U.S. propane inventories were 99 million barrels, 17 million barrels above the five-year average. In the Midwest (PADD 2), where most of the households that heat with propane and most of the demand for grain-drying is located, inventories are at 27 million barrels, which is 1 million barrels above the five-year average. We forecast that propane inventories will remain well above their previous five-year average.

Heating oil

Heating oil, a variation of distillate fuel, is the primary space heating fuel for 4% of U.S. households. We forecast that this winter, households that heat primarily with heating oil will use 453 gallons on average. At an average price of $4.11 per gallon (gal), we estimate average expenditures for those homes will be $1,860 this winter. Although we forecast heating oil prices will be down 19 cents/gal compared with last winter, higher consumption means expenditures will be almost $100 higher this winter.

data visualization of winter energy expenditures in three cases in homes heated with heating oil
Data source: U.S. Energy Information Administration, Winter Fuels Outlook

In our warmer case forecast for this winter, we expect average household consumption of heating oil will be 47 gallons less than the base case, with heating oil prices 2 cents/gal lower than the base case and household expenditures $204 lower than the base case. Conversely, in our colder case, we estimate per household consumption to come in 21 gallons higher than the base case, with heating oil prices 7 cents/gal higher and total household winter expenditures $120 higher compared with the base case.

Almost all heating oil consumption for space-heating in the United States occurs in the U.S. Northeast, particularly New England (PADD 1A) and the Mid Atlantic (PADD 1B). While we publish heating oil consumption as a U.S. average, the lack of significant consumption outside of the Northeast means the U.S. average price is heavily weighted toward the Northeast and corresponds closely to the Northeast regional average price.

data visualization of distillate fuel oil supply and disposition components
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Petroleum and Other Liquids Supply, Consumption, and Inventories

The Northeast has relatively little refinery capacity, and therefore, relatively little production of distillate fuel oil, including heating oil. East Coast distillate supplies come primarily from transfers from other regions, particularly the U.S. Gulf Coast, as well as imports, particularly from Canada. We expect that announced maintenance at the Irving Oil refinery in St. John, New Brunswick, Canada, and at the Monroe Energy refinery in Trainer, Pennsylvania, will temporarily reduce East Coast distillate fuel oil supplies.

Despite increases in U.S. refinery capacity this year (primarily along the Gulf Coast), we expect maintenance will reduce total refinery runs by 160,000 b/d in the fourth quarter of 2023 compared with 2022. Most transfers from the Gulf Coast to the East Coast move along the Colonial pipeline. Necessary transfers beyond existing pipeline capacity are more expensive, as the prices must reflect more costly coastal freight rates. Prices may also increase to attract international cargoes to the Northeast.

Total distillate inventories in the United States have been well below average since last year, and we currently estimate U.S. distillate inventories will decline by 11 million barrels in October, more than the average October draw from 2018–22 of 8 million barrels, largely because of refinery maintenance and draws in the Midwest related to agricultural demand.

data visualization of distillate fuel inventories
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: U.S. Petroleum and Other Liquids Supply, Consumption, and Inventories

While we don’t expect an inventory draw of a similar magnitude on the East Coast, we do estimate that regional refinery outages will prevent major inventory builds on the East Coast. As a result, we estimate regional distillate inventories will fall below 2022 levels beginning in November 2023 and will remain below 2022 levels until April 2024.

We estimate the heating oil crack spread – the difference between the wholesale price of heating oil and crude oil – to be 89 cents/gal this winter, which is 31 cents/gal lower than last winter. However, heating oil prices and crack spreads last winter set historic highs, and we expect the heating oil crack spread this winter will still be more than double the average of the last five winters. Many factors that contributed to the high distillate crack spread last winter remain true, including lower regional, national, and global distillate inventories, as well as lower regional refinery capacity compared to pre-pandemic levels.

data visualization of the distillate fuel crack spread
Data source: U.S. Energy Information Administration, Short-Term Energy Outlook
Data values: Energy Prices

Electricity

U.S. households that heat primarily with electricity will spend an average of about $1,200 this winter on their electricity bills, which is about the same as last winter. A slight increase in forecast average U.S. electricity consumption is offset by an expected 2% decline in U.S. residential electricity prices.

data visualization of winter energy expenditures in three cases in homes heated with electricity
Data source: U.S. Energy Information Administration, Winter Fuels Outlook

Nearly all U.S. households use electricity in some form, but 41% of households rely on electric heat pumps or electric resistance heaters as their primary source for space heating. Electric space heating is most common in the South, but the use of energy-efficient heat pumps is increasing in other regions of the country in response to new federal and state incentives. The heating equipment used by homes that heat primarily with electricity is varied compared with other heating fuels that largely use a central furnace. Values shown in the WFO are a weighted average of all electric heating equipment. Depending on the efficiency of the equipment, along with housing characteristics and geography, total expenditures will vary from our forecasts in this outlook.

data visualization of primary and secondary household heating equipment by fuel and technology
Data source: U.S. Energy Information Administration, Residential Energy Consumption Survey 2020
Data values: Table HC6: Space Heating

For the upcoming winter, the largest driver of forecast changes in electricity expenditures is the level of consumption. For the western states, we forecast residential consumption will be 11% lower than last winter because of milder expected temperatures. In contrast, forecast winter consumption rises by 6% in the South region.

We forecast a slight decrease in residential electricity prices this winter, with U.S. prices averaging 15.2 cents per kilowatt, about 2% lower than last winter. The lower prices for retail customers reflect the relatively low cost of producing power over the past year, especially the cost of natural gas.

Last winter, electricity generation fueled by natural gas reached a new record level of 619 billion kilowatthours (kWh), which accounts for 38% of the total U.S. generation by the electric power sector. We forecast a similar level and share of natural gas generation for winter 2023-24. The addition on new natural gas-fired generating capacity has been one factor keeping natural gas as the leading source of power generation. By October 31, we expect U.S. natural gas generating capacity to be 4.7 gigawatts (GW) higher than the previous October.

A more important contributor to the record levels of natural gas generation is the continued retirement of coal-fired capacity. Coal-fired power plants are less economical to operate than they have been in the past because of sustained low costs for competing power sources including natural gas and renewables. The amount of coal capacity operating at the end of 2022 was 66 GW lower than in 2017 (a decrease of 26%), and we expect the amount operating in October 2023 will be 10 GW lower than the previous year. We forecast coal will provide about 15% of total U.S. generation in winter 2023-24, down from a share of 18% last winter.

The relative levels of natural gas and coal generation this winter are dependent on the availability of fuel. Winter Storm Elliott in December 2022 and Winter Storm Uri in February 2021 led to forced outages at some natural gas-fired power plants in the affected regions as a result of constrained fuel supplies. If severe weather occurs again this winter, it could lead to limits on natural gas generation.

Inventories of coal at coal-fired power plants are in better condition than last winter, with October stocks expected to be 61% higher than last winter. In the event of severe winter storms in coming months, the remaining coal fleet may be called upon to operate at higher utilization rates than last year.



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