The lingering effect of last year’s tough winter
The U.S. Energy Department says heating costs are likely to be less this winter, thanks to relatively mild temperatures and a drop in oil prices.
The bad news in the forecast is the slight uptick in natural gas prices, which have gone up on average about 6 percent, the Energy Department’s Energy Information Administration says.
But thanks to milder temperatures anticipated for this winter, officials still predict less consumption of heating fuels and a drop in overall costs for households.
Last year’s severe weather and unusually cold temperatures are still having an impact, though. They are the cause of the higher natural gas prices, says Steve Piper, a natural gas analyst with SNL Financial.
“With the widespread cold weather, we drew down storage levels of natural gas to extremely low, critical levels,” Piper says.
While storage levels have recovered, they are still about 10.5 percent below the five-year average. The slight shortage has raised prices and is likely to continue to do so, Piper says.
“The gas utilities are going to be in the market actively procuring gas, to prevent a repeat of last winter’s events. And that’s going to bid up the price somewhat,” he says.
But even though more than half of the nation’s homes depend on natural gas for heat, officials still forecast less total spending on heat, because of the milder temperatures.
“We expect a relatively mild start to the winter, especially November and into December,” says Dan Leonard, a senior meteorologist with weather forecaster WSI, which operates The Weather Channel.
Leonard says while temperatures will get frostier in February, the expected mild start to winter will reduce the amount of heating needed. But the savings for households will not be uniform.
The EIA says households using natural gas — which already spend the least on winter heating — will save an average of $31 this winter. That affects more than half the households in almost every region of the country except the South.
Homes using electricity, which is a majority of homes in the South, will save an average of $17. The small proportion of homes using propane, many of which are in the Midwest, will save an average of $652. And heating oil households, almost all of which are in the Northeast and account for more than a quarter of homes in that region, will save an average of $362.
Meanwhile, the National Weather Service is preparing an updated forecast for winter, which the EIA cautioned could affect its forecast of heating costs.
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