By - Jim Vess

Midwest, Northeast to start winter heating season with higher fuel oil and propane prices

Energize Weekly, November 14, 2018

The Midwest is heading into the winter home-heating season with above average inventories, modest price increases and a forecast of a mild winter, while the Northeast is facing a decline in inventories, a sharp price hike and colder temperatures.

Propane prices were up nationally 4 percent compared to prices at the start of the 2017-2018 winter heating season, while residential heating oil prices were up 23 percent, based on market surveys by the federal Energy Information Administration (EIA).

On Nov.5, the U.S. average price for propane was $ 2.417 a gallon, and home-heating oil was $3.354 a gallon.

EIA is forecasting that heating oil prices will be 14 percent higher this winter than last, and propane will be up 4 percent. Factors such as higher crude oil prices and lower fuel inventories are pushing prices up, the agency said.

The Midwest has the highest percentage of homes heated by propane and accounts for 21 percent of all the propane consumption. Propane is also used as a petrochemical feedstock and for drying agricultural crops before storage.

The propane inventories for the Midwest had been lower than the five-year average for much of 2018, but additions in recent weeks have pushed the reserves above that average, according to the EIA.

Propane inventories for the Petroleum Administration for Defense District (PADD) 2, which encompasses 15 Midwestern states, were 27.8 million barrels, about 3 percent above the five-year average as of Oct. 19.

Most home-heating oil is consumed in PADD 1, which covers 12 Northeast states, and distillate fuel oil inventories for the district on Oct. 26 were 29.6 million barrels, 16 percent lower than the same time last year and 7 percent lower than the 2013-2017 average, according to EIA surveys.

Maine is the heaviest consumer of heating oil, depending on it for more than 50 percent of the state’s homes. Another 25 percent of the homes are heated by propane.

While heating oil inventories are below last year’s level, the EIA said they are still within the range of the five-year average. Distillate inventories dropped in early 2018 with an increase in demand spurred by global economic activity. They have increased since then, but still lag the five-year average.

Weather is a factor in both home-heating bills and fuel prices. The National Oceanic and Atmosphere Administration (NOAA) is forecasting that the 2018-2019 winter will be colder than last winter in much of the country, but milder in the Midwest. NOAA is predicting temperatures on average to be 1 percent warmer in the Midwest this winter.

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