How accurate were EIA’s Winter Fuels Outlook forecasts?
Data values: Winter Fuels Outlook
Every October, in our Winter Fuels Outlook, we publish forecasts for residential energy consumption, prices, and expenditures for the upcoming winter months. Generally, these forecasts have performed well. Our October forecasts for energy expenditures during the five-month period from November 2023 through March 2024 were within 3% of our final estimates for homes primarily heated with natural gas, electricity, and propane. Estimated energy expenditures for homes primarily heated with heating oil were 13% lower than our October forecast because of mild winter weather and lower-than-expected crude oil prices.
In our Winter Fuels Outlook, U.S. households are categorized by their main heating fuel and divided into the four census regions: Northeast, Midwest, South, and West. The consumption and expenditure values measure all end uses associated with a home’s primary heating fuel—not just the heating-related portion.
Weather is the largest source of uncertainty in our forecasts, so we also publish cases that assume colder and warmer winter weather. Throughout the winter, we update these forecasts based on realized weather and energy prices, and we publish our evolving forecasts for future weather and prices for the remaining winter months. The data values in this article reflect our final estimates based on the most recent data for weather and prices.
Winter weather was warmer than expected, especially in the Midwest
Our weather forecasts are based on a combination of near-term expectations provided by the National Oceanic and Atmospheric Administration (NOAA) and a linear trend that extrapolates the long-term degree day trends over the previous 30 years. In October, our forecast indicated that the upcoming winter would be 4% warmer than the previous 10-year average, as measured by population-weighted heating degree days. Instead, the winter was 9% warmer than the previous 10-year average.
The Midwest typically has the coldest winter weather. The particularly mild winter weather during December and February resulted in a 12% warmer-than-forecast winter in the Midwest.
Data values: Winter Fuels Outlook
The other three regions of the country also had warmer-than-forecast winter weather, but compared with the Midwest, heating degree day forecasts for those regions were more accurate. At the national level, this past winter was 6% warmer than our October forecast. This difference affected our consumption forecast, especially for propane, which is more commonly used as a primary heating fuel in the Midwest than in other regions.
Natural gas and electricity expenditure forecasts were generally accurate
Natural gas fuels heating equipment in 47% of homes, making it the most common primary heating fuel in the United States. In October, we forecast that natural gas-heated homes would spend $600 on natural gas bills from November 2023 through March 2024. Our final estimate was the same as our October forecast: $600.
Warmer-than-expected weather meant that actual natural gas consumption was less than our October forecast. However, actual retail natural gas prices were higher than we expected. These forecast errors mostly offset each other when calculating energy expenditures for natural gas-heated homes.
Similarly, actual electricity consumption was lower than our October forecast, and actual electricity prices were higher. These forecast errors offset each other, and actual expenditures were about the same as forecast expenditures. Electricity is the primary heating fuel in 43% of homes and is more common in the South and in parts of the country with relatively low heating demand.
In October, we forecast electricity expenditures to be $1,060 in our base weather case. Our final estimate for winter electricity expenditures—which includes all end uses, not just heating—was $1,080. These estimates represent a weighted average of all electric heating equipment.
Data values: Winter Fuels Outlook
Propane expenditures were in line with the forecast
Propane expenditures usually have the most uncertainty across our weather cases. In addition to being sensitive to changing weather, propane prices tend to fluctuate more than natural gas and electricity. Changes in propane prices are passed to consumers more readily than changes in natural gas and electricity prices, which are insulated from rapid wholesale price fluctuations because of the regulatory processes that determine how utilities set prices.
Propane is used by fewer homes (5% of the national total) but is more common in the colder climates of the Midwest and Northeast. We originally expected that these homes would spend $1,340 on propane in November through March. Our final estimate was $1,300.
Lower crude oil prices resulted in lower heating oil prices than forecast
Relatively few homes (4%) are heated with heating oil, and most of these homes are in the Northeast. Retail heating oil prices closely follow crude oil prices, which are sensitive to global markets. Our October forecast anticipated higher crude oil prices in the winter months and, therefore, higher retail heating oil prices than what occurred: actual retail heating oil prices were 9% lower than our October forecast. We estimate that homes that use heating oil as their primary heating fuel spent $1,610 this winter, or 13% less than our October forecast of $1,850.
Data values: Energy Prices (current forecast) and STEO Archives (October 2023 forecast)
Principal contributor: Owen Comstock