Household energy expenditures in the United States are likely to rise this winter as normal weather conditions return and energy prices increase, according to the "Winter Fuels Outlook," a feature of the October 2002 Short-Term Energy Outlook from the Energy Information Administration (EIA). According to this analysis, the chances of household heating expenditures rising by at least 10 percent this winter are over 90 percent for most of the country.

Fuel Prices

Average prices of the major heating fuels are projected to be higher than during last year's mild season. Contributing factors include higher crude oil costs resulting from production control by the Organization of Petroleum Exporting Countries (OPEC), higher natural gas prices resulting from low levels of drilling activity earlier this year, expanding consumption by power-generation facilities, and an expected recovery of industrial demand during the winter season.

Under these conditions, heating oil prices could be up by about 22 percent from last winter; price increases from 6 to 9 percent are expected for natural gas and propane.

Illustrative Consumer Expenditures for Heating Fuels, Winters 1999-2002 and Forecast 2002-2003

Source: Energy Information Administration.

Residential Heating Bills

Assuming normal temperatures during the 2002-2003 winter season, heating demand could increase between 12 and 18 percent over the previous winter, depending on the region. Combined with higher fuel prices, average household heating expenditures could increase between 19 percent for homes that heat with natural gas to 45 percent for those that heat with heating oil. The results, illustrated in the accompanying figure, appear to be broadly applicable across all regions in the United States, except in the western States, which could see lesser increases or even declines due to disparate weather patterns.

Although increases in residential heating bills are expected this winter, anticipated expenditures should still be below the level seen two years ago, the fifth coldest winter in the last 25 years. The National Weather Service has also indicated a modest chance of warmer winter temperatures in key heating regions due to El Niño.

Fuel Supplies

The risk of extreme runups this winter in the price of natural gas and propane is low because these fuels are expected to be well supplied. Both markets are starting the 2002-2003 heating season at above-average inventory levels. Working gas storage is estimated to be at the highest level in 11 years, while propane stocks are estimated to be 7 percent above last year, and at their highest level in 4 years.

Heating oil supplies, while not extremely low, are less plentiful than those of natural gas and propane, although the supply system for heating oil is more flexible than for other fuels. Beginning-of-season stocks are estimated to be slightly higher than last winter, but in the lower half of the previous 5-year range. Because of the high cost of crude oil this winter, additional supplies will be costly and price responses to demand surges may be significant.

The EIA's Short-Term Energy Outlook is published monthly and contains short-term energy projections for supply, demand, and price for the major fuels in the United States, as well as international oil forecasts. The "Winter Fuels Outlook" is included each October, and the "Summer Fuels Outlook" each April.

If you are having technical problems with this website, please contact the EIA Webmaster at wmaster@eia.doe.gov or call 202-586-8959. For general information about energy, contact the National Energy Information Center at 202-586-8800 or infoctr@eia.doe.gov.

Questions about the report's content should be directed to:

Dave Costello, Energy Markets and Contingency Information

dave.costello@eia.doe.gov

Phone: (202) 586-1468

URL: http://www.eia.doe.gov/emeu/plugs/plwfo03.html
File last modified: October 28, 2002