U.S. should brace for higher heating bills, potential supply issues

Oct. 11 (UPI) — The U.S. Energy Information Administration said most heating bills will be higher this winter season, as much as 20 percent over last year in the case of heating oil, while the weather may also be on average about one percent colder than last year — with potential fuel “supply issues” in cases of severe weather.

On average, the EIA expects natural gas bills to rise by five percent, home heating oil by 20 percent and electricity by three percent, the agency said in its latest Winter Fuels Outlook report, released Wednesday.

The agency, which defined the winter season as running from October to March, added that heating demand, based on a measure of how cold temperatures are compared with a base temperature it calls ‘heating degree day,’ is expected to be one percent higher than last winter or “roughly the same.”

The areas more likely to experience a colder winter are located in the West — with seven percent more “heating degree days” — while the Midwest may see warmer weather.

The EIA “expects fuel supplies to be adequate to meet winter demand, but localized supply issues are possible, particularly in the case of severely cold weather.”

Homes that use natural gas may face, in addition to the 20 percent price increase from last year, a potential supply issue because inventories by the end of October are projected “at the lowest levels for this time of the year since 2005.”

Inventories of natural gas will by the end of October reach 3.3 trillion cubic feet, 14 percent lower than the five-year average for this time of the year, the EIA said.

It also warned that wholesale natural gas prices will face “significant uncertainty” in the coming winter with potential localized “spikes”.

As for inventories of distillate fuel and propane, they are also below the five-year average in several regions, the EIA said.

In the Northeast, heating oil inventories were 30.9 million barrels near the end of September, or 19 percent lower than the previous five-year average.

“Unless severely cold temperatures in the Northeast coincide with severely cold temperatures in Europe,” ample heating oil supplies should be available, it said.

On the positive side, the EIA said that while the National Oceanic and Atmospheric Administration is forecasting heating demand could be one percent higher than the previous winter, it would be one percent lower than the 10-year average.

Also, heating oil prices will be lower than in the four-year period ended in 2014, when crude oil prices were also higher. Still, heating oil will this winter cost about 14 percent more than the average for the previous five winters.

According to the NOAA’s latest published report, there are uncertainties regarding the weather projections in part related to the possibilities for a development of an El Nino phenomenon in the Pacific Ocean. If there is a weak El Nino, other factors such as “arctic oscillation” will play a bigger role.

“Recent winters provide a reminder that weather can be unpredictable,” the EIA said.

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