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Today in Energy

October 7, 2014

Less severe weather means lower expected household heating bills this winter

graph of heating degree days and average winter household expenditures for heating fuels, as explained in the article text
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2014

After the unusually cold winter of 2013-14, U.S. households can expect lower heating expenditures this winter (October through March) compared with last winter. According to EIA's Short-Term Energy and Winter Fuels Outlook, average household expenditures for homes heating primarily with natural gas will total $649 this winter, a $31 decline from last winter's average. Homes heating primarily with electric heat are expected to spend $938 ($17 less). Homes using propane or heating oil have higher expenditures on average ($1,724 and $1,992, respectively) than homes using natural gas and electricity, but still lower ($652 less and $362 less, respectively) compared to last year.

According to the latest forecast from the National Oceanic and Atmospheric Administration (NOAA), temperatures are expected to be warmer than last winter. The extreme weather patterns last winter elevated demand for all heating fuels, led to a drawdown of inventories, and put upward pressure on prices. Because weather patterns present great uncertainty to winter energy forecasts, EIA's Winter Fuels Outlook includes projections for 10% colder and 10% warmer scenarios. Assuming 10% colder weather, heating expenditures would be expected to average 6% higher than last year for households heating with natural gas and 2% higher for those using electricity. Expenditures for propane and heating oil are still expected to be lower than last winter, even in the 10% colder scenario, as propane and heating oil prices are lower than last winter. In the colder scenario, propane-heated households spend 15% less and heating oil households spend 5% less than last winter.

graph of share of homes by primary space-heating fuel and Census region, as explained in the article text
Source: U.S. Energy Information Administration, based on 2013 American Community Survey

Differences in average expenditures across fuels are attributable to both differences in prices across fuels and the fact that some fuels are predominantly used in the coldest areas of the country.

Details of the winter outlook for individual fuels are discussed below:

Graph of U.S. average household winter natural gas price, consumption, and expenditures, as described in the article text

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2014
Note: Winter covers the period October 1 through March 31.

About one-half of U.S. households use natural gas as their primary heating fuel. EIA expects households heating with natural gas to spend an average of $30 (5%) less this winter than last winter. The decrease in natural gas expenditures is the net result of 10% lower fuel consumption, and 6% higher residential natural gas prices compared to last winter.

Graph of U.S. average household winter heating oil price, consumption, and expenditures, as described in the article text

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2014
Note: Winter covers the period October 1 through March 31.

EIA expects households heating primarily with heating oil to spend an average of $362 (15%) less this winter than last winter, reflecting a 10%, weather-related decrease in consumption, and a 25-cent-per gallon (4%) decrease in prices. Lower projected heating oil prices are largely the result of lower crude oil prices.

Reliance on heating oil is highest in the Northeast, where about 23% of households depend on heating oil for space heating; nationwide, only 5% of households, mostly in the Northeast, use heating oil. Last winter, households in the Northeast that use heating oil experienced the largest heating expenditures, as high heating demand and depleted inventories caused prices to spike. Northeast inventories are slightly lower than they were this time last year and may be supplemented with supplies from the Atlantic Basin market.

Although expected to have limited impact on the Northeast heating oil market, the recent reduction in heating oil maximum sulfur specification in five states (Connecticut, Maine, New Jersey, Rhode Island, and Vermont), and the implementation of new sulfur limits for marine vessel fuel that take effect in January add uncertainty to the winter heating oil outlook.

Graph of U.S. average household winter electricity price, consumption, and expenditures, as described in the article text

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2014
Note: Winter covers the period October 1 through March 31.

Households heating primarily with electricity are expected to spend an average of $17 (2%) less this winter with prices 3% higher and consumption 5% lower than last winter. About 39% of all U.S. households rely on electricity as their primary heating fuel, ranging from 15% of households in the Northeast to 63% in the South. Overall, electricity expenditures are less sensitive to winter heating demand because, unlike other heating fuels, electricity is also used to power dozens of appliances and equipment within a home, a level of demand that doesn't vary with the weather.

Graph of U.S. average household winter propane price, consumption, and expenditures, as described in the article text

Source: U.S. Energy Information Administration, Short-Term Energy Outlook, October 2014
Note: Winter covers the period October 1 through March 31.

About 5% of all U.S. households heat with propane. EIA expects households heating primarily with propane to spend less this winter, but the projected decline varies across regions. EIA expects that households heating with propane in the Midwest will spend an average of $767 (34%) less than last winter, reflecting prices that are about 24% lower and consumption that is 13% lower than last winter. Households in the Northeast are expected to spend an average of $340 (13%) less this winter, with average prices that are about 5% lower and consumption 9% lower than last year.

Households in the Midwest that primarily use propane experienced high heating expenditures last winter, as high heating demand and low inventories caused prices to spike. Last winter, logistical problems and relatively high use of propane for crop drying resulted in low Midwest inventories before winter began. Another record corn crop is expected this fall with potential to again raise crop drying demand and draw down inventories. However, primary inventories are 15% higher in the Midwest than last year, and 18% higher in the Gulf.

Nearly 2.5 million households (2% of all households) used wood as their primary residential space heating fuel in 2013, which represents a 38% increase since 2004. 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 New England homes (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 area's urban households. There are no readily available sources for estimating wood consumption or prices at the regional or national level.

Principal contributor: Stacy MacIntyre