EIA expects most U.S. households will spend less on energy this winter

We expect U.S. households that use natural gas and those that are located in the West (regardless of fuel type)—together accounting for more than half of all U.S. households—to spend less on heating this winter compared with last winter. U.S. homes that use heating oil will likely spend slightly more this winter than last winter because the increased heating demand due to a cooler winter in the Northeast, where heating oil is most used, is likely to offset lower heating oil prices.

The Winter Fuels Outlook focuses on retail energy bills for the four most common U.S. heating fuels, and it includes our forecast for winter (November through March) residential energy expenditures. Our forecast of expenditures by energy use reflects consumption across all residential energy uses, not just home heating. We release the Winter Fuels Outlook every October as part of our Short-Term Energy Outlook (STEO).

Household energy expenditures depend, in part, on how much energy the household uses. Energy consumption in households is heavily influenced by weather; the milder the winter, the less energy the household consumes. We expect a warmer-than-average winter this year with some variation by region. Our expectation is based on data from the National Oceanic and Atmospheric Administration (NOAA) and the previous 30-year trend.

Because weather is a significant source of uncertainty about energy use, the Winter Fuels Outlook also includes two side cases that assume a warmer and a colder winter.

Residential energy prices are another key determinant of household energy expenditures. This winter, we expect that residential energy prices for all heating fuels will be at least somewhat lower than they were last winter.

We expect wholesale natural gas prices to be 14% lower this winter than last winter, driven by higher U.S. natural gas production and robust natural gas inventories, leading to 21% lower retail natural gas prices for households.

Because natural gas is the most common fuel used to generate electricity in the United States, we expect that retail electricity prices will also be down slightly (2%) from last year, as the lower price that power plants pay for natural gas passes through to retail electricity rates.

Most U.S. homes that are heated primarily with heating oil are in the Northeast. We expect slightly lower retail heating oil prices this winter. However, we expect the Northeast to have a cooler winter compared with last winter, increasing household consumption of heating oil. We forecast the increase in consumption will outweigh the fall in prices for the average Northeast household, increasing energy expenditures this winter for households using heating oil by 8%.

We expect 6% lower U.S. propane prices this winter compared with last winter because the combination of increased U.S. propane production and record propane inventories has placed downward pressure on propane prices. Lower prices result in relatively flat expected expenditures for propane.

More information is available in our Winter Fuels Outlook, which we will update every month this winter at the same time as the monthly STEO release. You may also register to virtually attend our presentation of the report on Monday, October 16, at 11:00 a.m. eastern time.

Principal contributor: Ornella Kaze