U.S. ENERGY INFORMATION ADMINISTRATION
WASHINGTON DC 20585

FOR IMMEDIATE RELEASE
October 6, 1999

Sharply Higher Heating Fuel Bills Likely This Winter

According to the Energy Information Administration (EIA), higher crude oil prices, which have risen from a low monthly average of $9.39 per barrel in December 1998 to $23 per barrel in October 1999, will lead to higher prices for all petroleum products through the next year.

This winter, bills for heating oil and propane customers are expected to increase from the bargain basement prices of last winter. Depending on the weather, winter heating oil bills could range from an average of $100 to $370 higher (mild to severe cases) than last year, and in the base case, an average of $230 higher. Propane customers' bills could range from $120 to $390 higher than last year, with the base case averaging $230 higher.

However, supplies of heating fuels should be adequate to meet expected normal winter demand. Incremental requirements for a more severe winter than expected can probably be met without serious shortages, although such circumstances would most likely result in even higher prices than those forecasted for a normal winter season.

Other highlights for the Short-Term Energy Outlook include:

• Average wellhead prices for natural gas this winter are projected to be 40 percent higher than last winter. Futures prices for natural gas have been quite volatile since August, indicating that some observers are uncertain about the winter supply and storage situation. EIA's analysis indicates that storage levels are currently about equal to or only slightly below the relatively robust levels of one year ago. This, in addition to continued high levels of gas imports, leads to the expectation that wellhead gas prices, while still trending well above last year's levels, may remain below $3 per thousand cubic feet this winter unless very cold weather intervenes.

• One of the factors contributing to the higher oil prices this year is the stronger-than-expected compliance of the members of the Organization of Petroleum Exporting Countries (OPEC) to their agreed upon production cutbacks. Limited OPEC production also has had an effect on world oil inventories, which by the end of 1999 are expected to be either at or below normal levels. Although EIA expects crude prices to peak in December of this year (at about $24.50 per barrel) and then ease slightly thereafter, this presumes that OPEC will begin to relax its level of compliance with production cutbacks in the first quarter of 2000 (to a level of 77 percent from the 82-84 percent seen so far this year). Should the higher compliance rates continue, EIA would expect crude oil prices (and winter fuel prices) to be higher than projected in the base case.

• Drilling activity for both oil and natural gas dropped sharply in the first quarter of 1999 in reaction to the almost 50-percent decline in the price of oil. Since then, rig counts have recovered with the price of oil, and EIA believes that sufficient production capacity remains to meet the moderate increase in production requirements projected in the Outlook.

• The outlook for electricity demand in 1999 is modest growth of 1.2 percent. In 2000, electricity demand is expected to grow by 1.8 percent. Heating degree-days this winter are expected to be 8.0 percent higher than those of last winter, which was quite mild. Thus, 3.4 percent higher electricity demand is indicated for this winter compared to demand during last winter.

The Short-Term Energy Outlook is published monthly on EIA's Internet Web Site to meet the public's demand for more timely energy data and forecasts. Users can view and download the forecast analysis, tables and charts by going to the EIA Home Page at http://www.eia.doe.gov and selecting "Forecasts" from the menu. The Internet address for direct access to the Outlook is: http://www.eia.doe.gov/emeu/steo/pub. In addition to the Internet releases, the Short-Term Energy Outlook is published in printed form in April and October.

Printed copies of the Short-Term Energy Outlook, October 1999 will be available later this month from the U.S. Government Printing Office, 202/512-1800, or through EIA's National Energy Information Center at 202/586-8800.

EIA Program Contact: David Costello, 202/586-1468
EIA Press Contact: National Energy Information Center, 202/586-8800

EIA-99-23

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