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Government Warns of Sharply Higher Heating Costs
1 hour, 56 minutes ago U.S. National - Reuters
By Tom Doggett
WASHINGTON (Reuters) - American consumers will feel the effects of record-high crude oil prices with winter home heating oil bills jumping about 28 percent and natural gas costs rising by 15 percent, the U.S. government said on Wednesday.
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• Heating Oil Update (EIA)
"This winter, tight global oil markets and elevated crude oil prices are expected to result in higher heating oil, natural gas and propane prices," the Energy Information Administration said in its annual winter forecast.
The government's warning of sharply higher winter heating costs was issued less than a month before the November U.S. election, in which pocketbook issues are a major theme.
President Bush (news - web sites) has called for opening an Alaskan wildlife refuge to oil drilling to boost supplies, while Democratic challenger John Kerry (news - web sites) has sought to focus on conservation and stricter gasoline fuel standards to cut demand. However, most of the winter heating bills will not arrive in consumers' mailboxes until after the election.
The average Northeast household will pay a total of $1,223 for heating oil this winter, double the price paid three years ago and up from $953 last year, according to the EIA.
The average Midwest household will pay a total of $1,003 to heat with natural gas this winter, up from $870 last winter.
The government's winter forecast covers October through March.
U.S. crude oil prices ended at a record level above $52 a barrel on Wednesday at the New York Mercantile Exchange. Some energy analysts say prices might approach $60 a barrel in the coming weeks.
The Energy Department's analytical arm said it expects U.S. winter oil prices to average $46.43 in the current quarter and $44.71 in the first quarter of next year.
The EIA said below-normal oil inventories in the United States and other industrial countries have raised concerns about the adequacy of supply to meet increasing oil demand. As a result, the average monthly U.S. oil price is not expected to fall below $40 a barrel until the end of 2005, it said.
COLDER TEMPERATURES THIS WINTER?
Separately, the National Oceanic and Atmospheric Administration issued a winter forecast of colder-than-normal temperatures in the U.S. Southeast and mid-Atlantic regions. NOAA said it was unable to predict if the Midwest and Northeast would be colder, warmer or average this winter.
However, some private forecasters say the coming winter will be chillier than last year, boosting demand for heating oil and natural gas.
"Current levels of heating fuel inventories appear to be adequate to insure against unanticipated demand changes in case of severe weather," EIA said.
Still, oil inventories remain below normal largely because about 500,000 barrels per day (bpd) of offshore oil production was lost in September due to hurricanes in the Gulf of Mexico. Total U.S. oil production in September averaged just over 5 million bpd, the lowest since 1950, the EIA said.
The unexpected loss of offshore crude oil production has so far forced four refiners to borrow oil from the Energy Department's emergency stockpile in recent days.
Restoring all offshore oil production from the Gulf of Mexico could take as long as until mid-December, the EIA said.
Oil prices have also risen on strong demand from rapidly developing countries like China and India.
NATURAL GAS DEMAND UP
Demand for natural gas is forecast to be up 1.5 percent this winter, the EIA said.
"Not only is the typical residential and commercial customer expected to increase natural gas consumption during this heating season compared to last winter, but the number of such customers is expected to increase as well," it said.
The average wellhead price for natural gas is projected to be $6.04 per thousand cubic feet (mcf) this winter, sharply higher from $4.92 per mcf last winter, and the residential price will be almost double that level, EIA said.
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