(Bloomberg) U.S. households that use heating oil will
face record prices this winter as weather forecasters predict colder
temperatures in the Northeast that will drive up demand, according to a
The Energy Information Administration, which tracks and
analyzes energy data, projects households will spend 19 percent more on average
for heating oil and 15 percent more for natural gas from Oct. 1 to March 31,
the period covered in its short- term energy and winter fuels outlook released
“It is going to be colder than last year and as a result
of that, heating bills are going to be higher,”
said Adam Sieminski,
administrator of EIA, in Washington today.
About half of U.S. households use natural gas as their
main heating source. While only 6 percent of U.S. homes use heating oil, 80
percent of families that use the fuel are clustered in the northeastern part of
the country, according to the EIA.
The EIA report says its prediction for higher heating
bills stems from an expected return to normal winter temperatures east of the
Rocky Mountains compared with last winter’s unusual warmth.
“There has been a trend towards warmer weather so if we
end up with somewhat above normal temperatures rather than just slightly below,
that would reduce fuel oil needs and presumably would lead to better balance in
the markets and somewhat lower prices,”
Sieminski said. Alternatively, colder
weather or more geopolitical turmoil could raise costs higher than anticipated,
Predictions of higher energy costs may weigh on
President Barack Obama’s re-election chances by compounding voters’ economic
anxiety in the last few weeks before the Nov. 6 election.
The agency expects that households relying on heating
oil will spend an average of about $407 more this winter, a 19 percent increase
over last year, as a result of higher prices and consumption. The average
expenditures are expected to reach record levels, according to the EIA.
“This is going to be a very tough winter for many poor
said Mark Wolfe, executive director of the National Energy
Assistance Directors’ Association, a Washington-based group that advocates for
the Low-Income Home Energy Assistance Program.
Congress cut funding for LIHEAP to about $3.5 billion in
fiscal year 2012, a $1.6 billion drop from two years earlier, leaving less
federal assistance for families in need, according to the group.
Rising heating costs are also likely to hit middle-class
households, which could ripple through the economy as families have less money
to spend for other essentials, Wolfe said.
John Felmy, chief economist for the American Petroleum
Institute, a Washington-based oil and gas lobbying group, said higher crude oil
prices translates to higher heating oil costs.
The group, whose members include Exxon Mobil Corp. based
in Irving, Texas, has criticized Obama for not doing enough to promote domestic
development of oil and gas.
While oil prices are set on a global market, more U.S.
production would help the economy and reduce reliance on oil imports, Felmy
The EIA report does project higher U.S. oil production,
which could help Obama refute Republican claims he has been overly focused on
developing renewable sources of energy rather than on extracting cheaper fossil
The EIA expects U.S. total crude oil production to
average 6.3 million barrels per day in 2012, an increase of 700,000 barrels
from last year. In 2013, U.S. domestic crude oil production is projected to
reach 6.9 million barrels a day, the highest point since 1993.
U.S. output is rising from drilling in the North Dakota
Bakken shale formation and in the Permian Basin and Eagle Ford areas in Texas.
Crude oil prices are projected to decline as production
increases. Brent oil will average $111 a barrel in the fourth quarter of 2012
and fall to $103 a barrel in 2013, EIA said.
The EIA also projects that gasoline will cost $3.65 per
gallon on average in 2012 and fall to $3.44 per gallon in 2013.
Natural gas inventories at the end of September were 3.7
trillion cubic feet, or 8 percent more than at the same time last year,
according to EIA.
The agency, which is a division of the U.S. Energy
Department, said Henry Hub spot prices will average $2.71 per million British
thermal units in 2012 and rise to $3.35 per million Btu in 2013. Henry Hub in
Erath, Louisiana, is a benchmark for the fuel.
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