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U.S. ENERGY INFORMATION ADMINISTRATION Higher Heating Fuel Bills Expected This Winter This winter, residential space-heating expenditures are projected to increase for all fuel types compared to year-ago levels, according to forecasts released today by the Energy Information Administration in its October Short-Term Energy Outlook and special report “Winter Fuels Outlook: 2004-2005.” Increases in heating fuel prices are likely to generate higher expenditures even in regions where demand for fuel is expected to fall. Average residential natural gas prices this winter are expected to be 11 percent higher than they were last winter and household expenditures are expected to be 15 percent higher. Heating oil prices are expected to average 29 percent higher compared with last winter and household expenditures are expected to be 28 percent higher. Propane prices are expected to average 17 percent above last winter with 22 percent higher expenditures for propane-heated households. The main reasons for this forecast are: · Prices: This winter, tight global oil markets and elevated crude oil prices are expected to result in higher heating oil, natural gas and propane prices. The cost of imported crude oil to U.S. refineries this winter is projected to average 98.3 cents per gallon (about $41 per barrel) compared to 70.1 cents per gallon last winter. During the winter, West Texas Intermediate (WTI) prices are expected to decline from their current record levels but remain in the low $40’s-per-barrel range. Despite above-average natural gas stocks, average winter natural gas prices, both at the wellhead and retail levels, are expected to be above those of last winter, particularly during the fourth quarter of 2004, in response to the hurricane-induced production losses in the Gulf of Mexico during September. The average natural gas wellhead price is projected to be $6.04 per thousand cubic feet (mcf), up nearly 23 percent from last winter’s average of $4.92 per mcf. · Demand: Total U.S. natural gas demand is expected to be up 1.5 percent this winter compared to last winter’s demand level. This increase reflects greater heating degree-days in key regions with large concentrations of gas-heated homes and continued demand increases in the commercial and power-generation sectors. Not only is the typical residential and commercial customer expected to increase natural gas consumption during this heating season compared to last winter but the number of such customers is expected to increase as well. Per-household heating oil demand is projected to be slightly below last winter’s demand. As for propane demand, continued economic growth, a larger corn crop (and thus higher crop drying-related demand) than a year ago and projected increases in heating degree-days compared to last winter (particularly in the Midwest) account for much of the expected 1.0-percent demand growth. · Inventories: Due to the availability of primary inventories, heating oil, natural gas and propane markets are expected to be reasonably well protected against the impact of demand surges under most circumstances. As of October 1, working natural gas inventories were estimated at 3.065 trillion cubic feet (tcf), close to the upper bound of the normal range and 222 billion cubic feet (bcf) above the year-ago level at this time. Given continued net injections during October, working gas inventories by October 31 are expected to be at their highest level since 1990. Heating oil inventories were 3.7 percent below year-ago levels on October 1, but still well within the 5-year average range. Propane stocks were estimated to be within the normal range and 10 percent above year-ago levels. Other highlights from the Short-Term Energy Outlook include :· U.S. spot prices for crude oil (WTI) continue to fluctuate above the $45-per-barrel range. The projected average WTI price for the fourth quarter of 2004 is $46.40 per barrel. Prices continue to remain high even though Organization of Petroleum Exporting Countries (OPEC) crude oil production reached its highest levels in September since OPEC quotas were established in 1982. OPEC production capacity remains about 0.5-1.0 million barrels per day above current OPEC crude oil production levels. · Overall oil inventories in the United States and the rest of the industrialized world remain below normal, largely because almost 500,000 barrels per day of production were lost during the September hurricanes in the Gulf of Mexico region. Industry officials estimate that resumption of normal operations could take between 45 and 90 days. Below-normal oil inventories across the industrialized countries have contributed to concerns about the adequacy of supply to meet rapidly expanding global oil demand. As a result, monthly average WTI prices are not likely to fall below $40 per barrel until the end of 2005. · U.S. petroleum demand in 2004 is projected to average 20.4 million barrels per day, up 1.9 percent from last year. However, U.S. petroleum demand growth in 2005 is projected slow to 1.2 percent, in response to the combined effects of somewhat slower economic growth and high crude oil and product prices. · Natural gas prices weakened in August as cooling demand levels and peak power demand remained well below normal. However, current and futures prices increased in the latter half of September in response to production losses in the Gulf of Mexico caused by Hurricane Ivan. The average spot price for natural gas at the Henry Hub for the month of September was $5.15 per thousand cubic feet (mcf). Henry Hub prices are expected to average $6.10 per mcf in 2004 and $6.18 per mcf in 2005.Electricity demand is expected to increase by 1.7 percent this year and by another 2.7 percent next year. Projected electricity demand in the fourth quarter of 2004 is 3.2 percent above the year–ago level, when heating-related demand was depressed by mild weather conditions. The Short-Term Energy Outlook and Winter Fuels Outlook: 2004-2005 can be found on EIA’s Web site at: http://www.eia.doe.gov/emeu/steo/pub/contents.html.
EIA Program Contact: David Costello, 202/586-1468 EIA Press Contact: National Energy Information Center, 202/586-8800 EIA-2004-09
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