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Households that use natural gas, especially for space heating, will be confronted this winter heating season by the recent sharp increase in the price of natural gas and the forecast that higher prices will continue through the season and beyond. Residential natural gas prices remained in the $6 to $7 per thousand cubic feet (mcf) range annually throughout the 1990s (Figure 1). Although prices vary by season—lower in the first quarter and higher in the third quarter—comparison of residential prices for the same month (September) between 1999 and 2000 shows a sharp increase, from $8.63 to $9.78 per mcf (Monthly Energy Review January 2001). Prices that exceed $10 per mcf for the next few quarters before dropping below $9 are projected by EIA's Short-Term Energy Outlook February 2001 (STEO) (Figure 2).

According to the most recent Residential Energy Consumption Survey (RECS), the average American household paid $579 for natural gas in 1997 (at an average price of $6.96 per mcf). The price projected by the STEO is $10.07 per mcf for 2001. This price is applied to the average annual consumption reported by the 1997 RECS (83 mcf per household at prevailing 1997 weather conditions, Figure 3) to estimate expenditures at the projected higher price. In order to account for inflation when comparing expenditures for different years, all dollar values are converted to chained (1996) dollars. We find that households paid, in chained dollars, $568 in 1997 and would pay $765 at 2001 prices (Figure 4).

The use of natural gas in the United States is widespread. In 1997, 61 percent of residences used the fuel for one or more end uses—53 percent used it as the main heating fuel and 52 percent used it for water heating. Most natural gas (68 percent of the total) was consumed for space heating. While natural gas is widely used, its use and the amount consumed vary significantly within the residential sector and, consequently, the impact of higher prices will be variable. Consider the following findings from the 1997 RECS:

• Census Region: More than three-fourths of households in the Midwest Census Region used natural gas while less than half in the South did; households in the Midwest consumed nearly twice as much natural gas as did those in the West.

• Type of Housing Unit: More than 64 percent of single-family units used natural gas, 56 percent of multifamily buildings with 5 or more units used the fuel, and less than 40 percent of mobile homes used it. Single-family units consumed slightly more than the average for all residences.

• Year Constructed: Older homes were more likely to use natural gas—three-fourths of those built before 1960 used it, while less than half built since 1980 did. Older homes consumed more than newer residences.

• Household Income: The percentage of residences that used natural gas varied little by household income; however, higher income households consumed more natual gas than lower income households.

 
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Specific questions may be directed to:

Stephanie J. Battles
Stephanie.Battles@eia.doe.gov
Survey Manager
Phone: (202) 586-7237
Fax: (202) 586-0018  

Alan Swenson
alan.swenson@eia.doe.gov
Phone: (202) 586-1129
Fax: (202) 586-0018

http://www.eia.doe.gov/emeu/consumptionbriefs/recs/natgas/nat_gas_piece.html

Release date:  January 16, 2001