U.S. households will see heating costs drop this winter as milder weather reduces demand, the Energy Information Administration said.
The EIA said expenditures will fall by 15 percent on average for homes that rely on heating oil from October through March versus about 5 percent for natural gas and propane consumers. Electricity costs will drop by 2 percent. The projections are based on the National Oceanic and Atmospheric Administration’s forecast that the region east of the Rocky Mountains will be much warmer than last winter.
Heating costs surged early this year when waves of polar air spurred record demand for natural gas while depleting stockpiles of heating oil and propane. Lower costs next winter will also be aided by a rebound in stockpiles of natural gas and propane while heating oil consumers will benefit from the drop in benchmark crude oil prices, government estimates show.
“U.S. households in all regions of the country can expect to pay lower heating bills this winter because temperatures are forecast to be warmer than last winter and that means less demand for heat,” EIA Administrator Adam Sieminski said in an e-mailed statement.
About half of U.S. households rely on natural gas for heating and 39 percent for electricity, EIA data show. Heating oil and propane each have five percent share nationwide.
Households relying on natural gas will see heating costs drop 4.6 percent to $649 after rising the previous winter to three-year high of $680, the EIA said. The decline will be driven by a 9.8 percent drop in fuel consumption even as the price of gas increases by almost 5.8 percent in the period.
Utilities started stocking up for next winter in April and prices this year are on average higher than they were a year earlier, the EIA said.
Gas stockpiles rebounded at a record pace after dropping to an 11-year low of 822 billion cubic feet in March. The EIA expects stockpiles to jump to 3.532 trillion cubic feet by the end of this month, which would be the lowest for the time of year since 2008.
“Even if this winter is as cold as last year’s, the net withdrawal from natural gas inventories over the heating season would not be as large as last winter’s drawdown because domestic gas production this winter is expected to be significantly higher than it was last winter,” Sieminski said.
Households using heating oil will pay $1,992 this winter, 15 percent less than a year earlier, as prices and demand are projected to decline, the statistical arm of the Energy Department said.
The fuel will average $3.63 a gallon, down from $3.88 last winter. The amount of oil consumed is projected to slip 9.6 percent.
“Heating oil prices are expected to be lower this winter because crude oil prices are lower,” said Sieminski.
West Texas Intermediate oil fell to $88.18 Oct. 2 on the New York Mercantile Exchange, the lowest intraday price since April 23, 2013. Brent for November settlement touched $91.25 yesterday, the lowest level since June 28, 2012 on the London- based ICE Futures Europe exchange.
Propane consumers in the Midwest will see costs drop by 34 percent on average to $1,500 amid higher stockpiles while homes that rely on electricity will see drop of 1.8 percent to $938, according to the EIA’s winter fuels outlook.
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