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October 27, 2021

U.S. consumers expected to spend more for heating oil this upcoming winter

U.S. average heating oil winter household expenditures
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, Winter Fuels Outlook, October 2021

In our latest Winter Fuels Outlook, we expect higher heating oil prices and a slightly colder winter compared with last year will contribute to households across the United States spending more on heating this winter (October–March) compared with the past two winters.

About 4% of all U.S. households use heating oil as the primary fuel for space heating, and the vast majority of these households are concentrated in the Northeast. About 18% of households in this region use heating oil for space heating, down from 27% 10 years ago. We forecast that households that use heating oil as the primary space heating fuel will spend $1,734 on average this winter season, 43% more than last winter.

Higher forecast consumer heating oil expenditures primarily reflect higher retail heating oil prices. Retail heating oil prices are rising in the United States because crude oil prices are higher and inventory levels are lower compared with previous winters. Northeast U.S. distillate fuel inventories (which include heating oil and diesel fuel) totaled 25.8 million barrels on October 8, which is 33% less than the previous five-year average for that week. The low inventory levels will likely increase heating oil prices, which we expect will average $3.39 per gallon this winter, a 33% increase over last winter.

However, we do not expect significant supply disruptions in the Northeast because it has several alternative sources of supply, including local refinery production, shipments from other regions in the United States, and waterborne imports from Europe.

Distillate inventory levels are low in other Atlantic Basin markets, however, which means distillate prices would need to be relatively higher in the Northeast for the region to import distillate from other markets.

In addition, we expect this winter to be colder than last winter, based on the National Oceanic and Atmospheric Administration’s forecasts for slightly lower temperatures this year than last year, which will contribute to more heating fuel consumption per household.

Weather expectations are key inputs in our energy consumption forecast for higher household energy expenditures this winter compared with last winter. Because fewer houses now use home heating oil, we forecast U.S. demand for home heating oil to average 390,000 barrels per day this winter, down slightly from last winter. We forecast that heating oil consumption per household, however, will increase this winter compared with last winter because of the expected colder temperatures.

For the winter of 2021–22, we forecast heating oil consumption per household will average 511 gallons, up nearly 8% compared with last winter. In the Northeast, where space heating with heating oil is most prevalent, we expect this winter to be 4% colder than last winter.

For a more detailed analysis of our heating fuels forecast, including analysis on natural gas and electricity, see our Winter Fuels Outlook, which includes the forecast for our base case, a 10% warmer scenario, and a 10% colder scenario.

Principal contributors: Matt French, Sean Hill