Higher heating fuel bills expected this winter

Oct. 8, 2002 — This winter is expected to bring with it higher heating bills than those seen last winter, according to forecasts released today by the Energy Information Administration in its October “Short-Term Energy Outlook.”

Under normal weather assumptions, winter heating bills for residential consumers could average from $100 to $300 higher than last winter.

Higher energy demand due to colder weather and higher prices than those of last winter are the reasons for increased household heating expenditures, which are forecast to be: 19 percent higher for natural gas, 45 percent for heating oil, and 22 percent for propane.

These results are based on the assumption that weather will be normal this winter, compared to weather that was as much as 10 to 20 percent warmer than normal last winter (depending on the region). While the probability of expenditures returning to the low levels seen last winter’s small, warm weather patterns (from El Ni?o effects, for example) could significantly reduce the expenditure impacts.

The main reasons for this forecast are:

“- Because of the mild weather conditions last winter, the 2002-2003 heating season is expected to yield increases in heating fuel demand on a year-over-year basis. Nationally, heating degree-days would be up sharply compared to last winter if normal weather conditions prevail. The increase would be about 19 percent in the Northeast, the region in which most U.S. heating oil demand occurs.

“- Both natural gas and propane markets are expected to be well supplied under most circumstances, due primarily to the ample availability of primary inventories. Beginning-of-season (end-of-September) working gas storage is estimated to be 3,058 billion cubic feet (bcf), 114 bcf higher than last year and the highest in 11 years at this time of year. Propane stocks at the outset of this winter season are estimated to be 71.5 million barrels, 4.5 million barrels higher than last year and the highest level in 4 years.

“- Heating oil supplies are less plentiful than those of natural gas and propane, although the supply system for heating oil is more flexible than for the other fuels. Beginning-of-season stocks are estimated to be 130 million barrels, 3 million higher than those of the previous winter – but somewhat below the recent average.

Deterioration of the distillate inventory position during the fourth quarter, which appears likely, poses a strong upward price risk near mid-winter if weather turns colder than normal.

Other highlights for the “Short-Term Energy Outlook” include:

“- The OPEC basket price has been above $22 per barrel since March 8, 2002, and the September average of $27.50 per barrel marked the seventh consecutive month that the average monthly OPEC basket price remained within OPEC’s original target range of $22 – $28 per barrel. Although the daily OPEC basket price exceeded this range during the end of September, the base case monthly average is projected to be within this target range throughout the forecast period.

“- U.S. oil demand growth for all of 2002 compared to the 2001 average level is expected to be up by only 0.3 percent (about 60,000 barrels per day). However, demand growth is accelerating as U.S. industrial output begins to register year-over-year gains and as weather-related demand picks up (assuming winter temperatures are normal). The projection for U.S. oil demand growth in 2003 is 3.0 percent.

“- In 2002, natural gas demand is projected to increase by 3.6 percent over 2001 levels. Higher estimated demand in the industrial and electric power sectors more than offset the declines in space heating-related demand in the first quarter of 2002.

In 2003, natural gas demand is expected to increase by 3.5 percent, as the economy continues to recover, with increases expected across all sectors.

“- Despite strong demand in the third quarter due to very hot weather across much of the nation, total annual electricity demand growth (retail sales plus industrial generation for own use and other direct sales) is expected to be up only 0.4 percent in 2002, principally due to a weak first quarter. Growth in 2003 is expected to average 2.2 percent as the economy recovers.

The “Short-Term Energy Outlook” is published monthly on EIA’s Internet Web site to meet the public’s demand for 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/steo.

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