A colder winter and higher energy prices will boost winter heating costs, EIA says
Energize Weekly, October 19, 2022
American households will pay more for natural gas, electricity, heating oil and propane to heat their homes, spurred by increased energy prices and the forecast of a colder winter, according to the U.S. Energy Information Administration (EIA).
“Almost 90 percent of U.S. homes are heated primarily by natural gas or electricity,” the EIA said. “On average, we expect wholesale prices for natural gas to be higher this winter than last winter, leading to higher retail prices for both natural gas and electricity this winter. Natural gas is the most common fuel used to generate electricity in the United States.”
The agency forecasts that homes that heat with natural gas will see a 28 percent increase in costs as natural gas prices have risen sharply this year, spurred by an increase in consumption that outpaced production 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,” the agency said.
Compounding the problem, natural gas inventories are projected to end the April-to-October injection season 6 percent below the 2017-2021 five-year average.
Households will spend an average of $930 this winter on their gas bills, the EIA said.
Homes that primarily use electricity for heating will see 10 percent rise in what they pay, with an average of $1,360. The increase is based on a 4 percent increase in how much electricity they use during a colder winter and a 6 percent increase in residential electricity rates.
“Nearly all U.S. households use electricity in some form, but 4 out of 10 households rely on electric heat pumps or electric resistance heaters as the primary source for space heating,” the EIA said. “Nearly two-thirds of homes in the South heat primarily with electricity. Electric heaters are also commonly used as a secondary heating source in many U.S. homes.”
Household expenditures for heating oil will increase due to the same factors driving natural gas and electricity – higher prices and increased cold weather consumption.
“We expect retail heating oil prices to be 19 percent higher than last winter, reflecting price pressures in the distillate fuel oil market: low inventories, low imports, and limited refining capacity,” the EIA said.
While electricity home heating is mainly in the South, the use of home heating oil is centered in the Northeast, with New York, Pennsylvania and the New England states accounting for 85 percent of consumption. They make up just 4 percent of U.S. households.
Those household will spend about 27 percent more on heating oil, an average of $2,350 this heating season and use about 520 gallons of oil.
About 5 percent of all U.S. households use propane as the primary space heating fuel. The EIA forecasts they will spend about $80 more – 5 percent on average – for fuel this winter compared with last winter.
EIA is basing its weather forecast on the National Oceanic and Atmospheric Administration’s (NOAA) prediction of a slightly colder winter compared to last winter and the 10-year winter average.
A warmer or colder winter will impact heating expenditures. For example, based on the NOAA outlook, EIA’s forecast assumes the Northeast, will be 5 percent colder than last winter, but if the winter is 10 percent colder than forecast, the average household expenditures for heating oil would be 11 percent higher.
“Colder weather contributes to our expectation for more energy consumption across all fuels and regions,” the agency said. “Inventories across a range of heating fuels are low, creating the possibility for high price volatility and price spikes, particularly if this winter turns out to be very cold.”