Short-term energy and winter fuels outlook
The Energy Information Agency released its annual energy and winter fuels outlook that details projected space-heating expenses for the upcoming winter season.
The Energy Information Agency (EIA) released its short-term energy and winter fuels outlook . The EIA projects the average expenditures for space-heating fuels from Oct. 1 to March 31. The highlights of the outlook are below:
• EIA projects average household expenditures for space-heating fuels to be $960 this winter (Oct. 1 to March 31), a decrease of $84, or 8%, from last winter. This forecast principally reflects lower fuel prices, although expected slightly milder weather than last winter will also contribute to lower fuel use in many areas. The largest expenditure decreases are in households using natural gas and propane, projected at 12% and 14%, respectively. Projected electricity and heating oil expenditures decline by 2%.
• According to the National Oceanic and Atmospheric Administration's (NOAA) most recent projection of heating degree-days, the Lower 48 States are forecast to be 1% warmer this winter compared with last winter and 1% milder than the 30-year average (1971-2000). However, heating degree-day projections vary widely between regions. For example, the Midwest, a major market for propane and natural gas, is projected to be about 4% warmer than last winter, while the West is projected to be about 4% colder.
• EIA expects the price of West Texas Intermediate (WTI) crude oil to average about $70 per barrel this winter (October through March), a $19 increase over last winter. The forecast for average WTI prices rises gradually to about $75 per barrel by December 2010 as U.S. and world economic conditions improve. EIA's forecast assumes U.S. GDP grows by 1.8% in 2010 and world oil-consumption-weighted GDP grows by 2.6%.
• Energy prices remain volatile, reflecting uncertainty, or risk, in the market. To measure this uncertainty, EIA is tracking futures prices and the market's assessment of the range in which those futures prices might trade. The Outlook will now report confidence intervals around the New York Mercantile Exchange (NYMEX) crude oil and natural gas futures prices using a measure of risk derived from the NYMEX options markets known as "implied volatility."
• Natural gas inventories are expected to set a new record high at the end of this year's injection season (October 31), reaching more than 3.8 trillion cu ft. The projected Henry Hub annual average spot price increases from $3.85 per thousand cu ft in 2009 to $5.02 in 2010.
Projected Winter Fuel Expenditures by Fuel and Region
The average household winter heating fuel expenditures discussed in this Outlook provide a broad guide to changes compared with last winter, but fuel expenditures for individual households are highly dependent on local weather conditions, market size, the size and energy efficiency of individual homes and their heating equipment, and thermostat settings.
• Natural Gas: EIA expects households heating primarily with natural gas to spend an average of $105 (12%) less this winter. About 52% of all households depend on natural gas as their primary heating fuel. The 12% decline in natural gas expenditures reflects an 11% decrease in prices and a 1-% decrease in consumption. In the Midwest, where more than 70% of all households rely on natural gas, a projected 15% decrease in average household expenditures results from an 11% decrease in prices and a decline in consumption of 4% based on the forecast of warmer weather than last winter.
• Heating Oil: EIA expects households heating primarily with heating oil to spend an average of $40 (2%) less this winter. About 7% of U.S. households depend on heating oil for winter fuel. The Northeast accounts for 80% of heating fuel consumption. In that region, the average household is projected to spend 3% less ($60) than last winter as a result of a 2% decrease in consumption, with regional prices about 1% less than last winter. EIA projects residential heating oil prices in the Northeast to average about $2.64 per gallon during the winter season, 2 cents less than last winter. For comparison, prices averaged $3.31 in the winter of 2007-08.
• Propane: EIA expects households heating primarily with propane to spend an average of $280 (14%) less this winter but that decrease varies broadly by region. EIA expects Midwestern households to see an average reduction in expenditures of 21%, and homes in the West 5 % less this winter. One-half of the difference in the change in fuel bills between the two regions is due to weather with the Midwest about 4% warmer and the West about 4% colder than last winter. Propane-heated households represent about 6% of total U.S. households.
• Electricity: Households heating primarily with electricity can expect to spend an average of $20 (2%) less than last winter. The 2% decline in electricity expenditures reflects a 2% decrease in prices and very little change in consumption. Thirty-five percent of all U.S. households rely on electricity as their primary heating fuel, ranging from 13% in the Northeast to 59% in the South. The number of households heating with electricity is growing faster, at an estimated annual rate of 2.5%, than all the other major heating fuels.
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